Theoretical Review on Intergovernmental Fiscal Transfer in Nepal

The history of intergovernmental fiscal transfer begins with the conception of transfer, fiscal redistribution, and equal welfare system according to Constitution 2072. Nepal is Federal state. According to this structure, Intergovernmental fiscal transfer system promotes the co-ordination and cooperation between central and local level government and ensure the revenue for expenditure in development. In various kinds of political period, anyway, there was fiscal transfer system in state as vertical or symmetrical between state to state, central to local, local to central government. The fundamental objective of this article is to analyze the different perspectives and theoretical arguments of intergovernmental fiscal transfer relating to government policies. Intergovernmental fiscal transfer is meant to bridge the horizontal and vertical fiscal imbalances that are inevitable to exist between the federal and regional governments and among the regional governments. Intergovernmental fiscal transfer is guided by principle and theory of fiscal federalism (1st generation and 2^nd generation). Accordingly, this article examines current theories and concept, methodologies, including debate and issues of fiscal transfer system.