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critical task confronting the designers of Nepal’s federal system will be to determine who raises government revenues and who spends them.
Fiscal questions are at the core of the operation of every federal system. They shape the federal dynamics and play a major role in determining the real functioning of the federation.
The laws or constitutional articles governing these tasks are known as “the fiscal regime.”
Lawmakers in Nepal will first need to determine the powers of the federal and constituent unit (state or provincial) governments to raise taxes and other government revenues, including debt.
Then they will have to decide which order of government will have the responsibility for delivering and paying for particular services and programs – such as defence, education, roads, and health. If there is a potential mismatch between the responsibility for raising and the responsibility for spending money, there will need to be a way to resolve this problem.
The federal debate in Nepal is still at an early stage. As I suggest in my introduction to this special edition of Federations, the debate so far may have been too preoccupied with the number and boundaries of constituent units and not paid enough attention to other important questions. While there seems to be a strong current of opinion that Nepal’s federal system will