A proposal to drastically increase land tax rates has reached the Land Reform and Management Ministry. According to the Centre for Development and Administration at Tribhuvan University, since the tax rates are very low, the amount of land kept fallow is slowly increasing. CEDA believes that once tax rates are increased people will start tilling their lands to earn the amounts they will have to pay as taxes. The amount of fallow land will decrease and this will lead to increase in production, which will in turn increase the country's internal revenue.
Experts involved with the study stated that the country was depending too much on foreign financial help, and to break the trend, increasing land tax would be the most appropriate measure. As of now the tax base in the country is very narrow. Only 11 percent of the total GDP is collected as revenue and the share of land tax is miniscule-only Rs 1.4 million was collected as land tax in 1998/99. Eighty percent of the country's people depend on agriculture which contributes almost 40 percent of the total GDP, but the tax collected from this sector is minimal.
Till now land and houses are being used as collateral while applying for loans from banks and other financial institutions. CEDA has come up with a proposal to take this land right into the capital market. According to the proposal, if the land is taken into the capital markets, the system of division of land will decrease or stop completely. In Nepal, land is looked upon and taken as ancestral property and as time goes by this land is divided into smaller plots. This in turn leads to decreased productivity. If land is listed in the stock markets it becomes a commodity like other industrially produced goods or services and buying and selling of land will be done through shares. This will help in the correct use of land, land will be made productive and its use will be optimal. CEDA states that ancestral property will also be bought and sold through shares and help reduce the division of land.