Health Ministry Seeks 25% of Tobacco Excise Revenue for Health Tax Fund

The Ministry of Health and Population has asked the Ministry of Finance to immediately release 25 percent of the excise duty collected on tobacco products to the Health Tax Fund, citing a long-standing legal provision that has yet to be implemented.

In a letter sent to the Finance Ministry, the Health Ministry said the law requires at least 25 percent of excise revenue generated from tobacco and smoking-related products to be deposited in the Health Tax Fund, but the fund has not received the amount so far.

Clause 18 of the Tobacco Products (Control and Regulation) Regulation, 2006 mandates that a portion of excise duty imposed under the annual Finance Act be transferred to the Health Tax Fund. The law also provides for the establishment of the fund to support the prevention, diagnosis and treatment of diseases caused by tobacco use.

Health Ministry spokesperson Prakash Budhathoki said the ministry formally sought the release of the funds after repeated delays despite clear legal provisions.

“The fund has lost a significant amount of revenue, making it difficult to run major programmes such as health insurance,” Budhathoki said. He added that the regulation allows up to 75 percent of the fund to be allocated to government-owned hospitals for the diagnosis, treatment and research of tobacco-related diseases.

Budhathoki said the government collects around Rs 28–29 billion annually from excise duty on tobacco products, of which 25 percent should legally go to the Health Tax Fund.

“If the Health Tax Fund receives the amount, 90 percent of it will be transferred to the Health Insurance Fund, allowing citizens to access services through insurance,” he said, adding that the health insurance programme is currently struggling due to a lack of resources.

Several hospitals have stopped providing services under the insurance scheme, citing delays in reimbursement. The ministry, Budhathoki said, has begun discussions with the Finance Ministry to secure sustainable funding sources.

Health and Population Minister Dr Sudha Gautam also raised concerns last week, saying the ministry has not received the funds collected in the name of the health tax.

“Money is being collected in the name of health tax, but we have not received it,” she said, adding that the government would continue pressing the Finance Ministry to release the funds in line with the regulation.

Health Ministry officials say earmarking a fixed portion of revenue from tobacco and alcohol for health insurance is a common global practice and could generate billions of rupees annually if implemented in Nepal.

Officials at the Ministry of Finance, however, said that even if the full amount is not transferred to the Health Tax Fund, the health sector receives substantial allocations through the annual budget.

“Since a large amount is allocated to the health sector through the annual budget, excise revenue collected from tobacco products may not be fully transferred under the same heading,” a Finance Ministry official said.

The official added that the government is currently under financial pressure due to election-related expenses and lacks immediate fiscal space to transfer funds to the Health Tax Fund. However, the Finance Ministry has already released the annual subsidy allocated for operating the health insurance programme.

Finance Ministry officials also said the Health Insurance Board should focus on strengthening its capacity by fully implementing provisions of the Health Insurance Act and regulations to ensure long-term sustainability.