Mahesh Baral

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Due to the centre dominated intergovernmental fiscal relation; the decentralization efforts of Nepal remained incomplete even after 9 years of the implementation of LSGA. The financial health of Nepalese local governments, particularly small municipalities is vulnerable as they are going to loose a big chunk of resource called LDF in near future and so far no substitute for it is prescribed or recommended. Many researchers have argued that the proper implementation of property based tax could replace the LDF but there are many concerns and several barriers with such tax system. Firstly it has limited scope to improve the financial health of those municipalities and secondly there are many obstacles: tax culture of the local people, weak institutional capabilities, absence of proper database, untrained human resource and rampant corruption are few of them. Nevertheless, the municipalities have distinct comparative and competitive advantages, which should be explored and implemented accordingly.