A 10 percent income tax is deducted at source from every employee working in the organised sector. But people working for the United Nations do not pay income tax. They earn thousands of rupees every month but do not have to pay any income tax at all. The law says a 15 percent income tax is payable by every individual who earns more than Rs 55,000 per year, in the case of a family this amount is fixed at Rs 75,000. Under this law, all people employed in the formal sector pay tax. Only Nepalis working in the various UN projects, programs and other related areas do not.
The Vienna Convention of 1961 clearly states that all local personnel employed by the UN will have to pay taxes in their respective countries. The UN, when appointing Nepalis, makes it clear that they have to pay taxes. A very good statement in theory, but in practice it does not work. All Nepalis are taxed at source. The UN does not tax its local employees at source and these employees do not make the effort to go and pay their taxes.
According to the information provided to Deshanter by a UN official, 12 UN agencies have offices in Nepal. 390 Nepalis and 190 foreigners work at these agencies. Of these, over 150 are of the officer level or higher. None pay taxes.
The salary of local UN staff ranges from Rs 35,000 to Rs 179,000 per month. Yearly income taxes payable by these people would range from Rs 437,000 to Rs 2,148,000. According to Nepali law, individuals who earn more than Rs 75,000 per month and couples who earn more than Rs 150,000 are taxed at a flat rate of 25 percent. The truth is they do not pay and the government does not ask them to pay. It is strange that even though more than 150 foreigners are employed by the UN in Nepal, officials have no information of them. The chief of the internal revenue department at Patan says the government requested the UN to provide the information last year and there was no response.