The Sushila Karki government was formed in the wake of the Gen Z uprising with the singular mandate of holding elections on March 5, 2026. As such, besides other day to day activities, its whole focus should be trained on that task—for that is the only metric with which its success will be measured. By the same token, the interim government should also refrain from making any decisions with long-term consequences for the country. Only a sovereign parliament and an elected government have the authority to weigh in on such matters. Yet, strangely, for a government formed on an explicit anti-corruption platform, it has made such a wholly avoidable blunder by granting tax exemption to Dolma Impact Fund, which has been challenging investment into Nepal through a shell company registered in the tax haven of Mauritius. Dolma, which has investments in 16 companies, had long sought such an exemption. But successive governments had carefully avoided stepping on this minefield.

The government based its decision on the Double Taxation Avoidance Agreement (DTAA) signed with Mauritius. There has long been ambiguity over whether such foreign investments are taxable under Nepal’s Income Tax Act, 2002. The exemption will allow Dolma to save taxes on its income in Nepal, financially benefiting the fund and making it easier to repatriate dividends abroad. After a previous attempt to exempt Ncell, a telecom provider, ended in a dispute, the Nepali tax authorities had cautioned the Karki government not to make the same blunder in Dolma’s case. The Ncell dispute, also rooted in claims of double taxation, had reached the Hague-based international tribunal before Nepal’s Supreme Court and the tribunal both ruled that Ncell’s income was taxable in Nepal. Despite that precedent, the finance ministry has now chosen to grant Dolma a tax waiver.

It is ironic that Rameshore Khanal, who as finance secretary had made a strong case for taxing Ncell, has as finance minister lobbied to exempt taxes for Dolma. Nepal and Mauritius had signed a DTAA on August 3, 1999. The treaty requires that a Mauritius-based company hold at least 50 percent ownership in the investing entity to be eligible for tax exemptions. But documents obtained by the Post show that Mauritian investors hold only 0.75 percent ownership in the company that is channeling investment into Nepal, while 99.25 percent belongs to investors from outside Mauritius. The rulings of national and international courts, the country’s precedents, and opinions of current and former tax officials all suggest the exemptions for Dolma are wrong. If the decision stands, not just Ncell, a host of other foreign companies will claim tax exemptions for their earnings in Nepal, potentially costing the cast-strapped country billions of rupees a year in lost revenues. For whatever reason the decision was made, the Inland Revenue Department (IRD), the autonomous tax body, must take the initiative to roll it back. If this government and its agencies lose their image of clean and fair administrators, it will have lost the very foundation on which it was built.