About this quiz
Fiscal federalism, revenue sharing, NNRFC and grants.
This Lok Sewa practice set has 50 multiple-choice questions (Subject: Governance Systems · For: Section Officer, Nayab Subba · Level: Medium). Take the quiz above first; after that, use the study list below to revise every question with its correct answer and a short explanation.
Study list: all 50 questions with answers and explanations
Fiscal federalism deals with dividing among levels of government their:
- A) Revenue, spending and transfers ✔
- B) Armies
- C) Courts only
- D) Political parties
Why: Fiscal federalism deals with how revenue, spending and transfers are divided among federal, provincial and local governments.
Financial powers of the three levels are given in Article:
- A) 60
- B) 59 ✔
- C) 51
- D) 274
Why: Article 59 sets out the financial powers of the federation, provinces and local levels.
Distribution of revenue sources is given in Article:
- A) 59
- B) 116
- C) 60 ✔
- D) 250
Why: Article 60 covers the distribution of revenue sources among the three levels.
The constitutional commission for revenue sharing is the:
- A) Public Service Commission
- B) Election Commission
- C) CIAA
- D) National Natural Resources and Fiscal Commission ✔
Why: The National Natural Resources and Fiscal Commission (NNRFC) recommends revenue sharing and grants.
NNRFC is provided in Articles:
- A) 250–251 ✔
- B) 238–239
- C) 242–243
- D) 245–246
Why: The NNRFC is provided in Articles 250 and 251 of the Constitution.
The main law on intergovernmental fiscal relations is the Intergovernmental Fiscal Arrangement Act of:
- A) 2063 BS
- B) 2074 BS ✔
- C) 2076 BS
- D) 2080 BS
Why: The Intergovernmental Fiscal Arrangement Act, 2074 is the main law on revenue sharing and grants.
Schedule 5 of the Constitution lists the powers of the:
- A) Provinces
- B) Local levels
- C) Federation ✔
- D) Concurrent list of all three
Why: Schedule 5 lists the exclusive powers of the Federation.
Schedule 6 lists the powers of the:
- A) Federation
- B) Local levels
- C) Judiciary
- D) Provinces ✔
Why: Schedule 6 lists the exclusive powers of the Provinces.
Schedule 8 lists the powers of the:
- A) Local levels ✔
- B) Provinces
- C) Federation
- D) Constitutional bodies
Why: Schedule 8 lists the exclusive powers of the local levels.
The concurrent list for all three levels is Schedule:
- A) 7
- B) 9 ✔
- C) 5
- D) 6
Why: Schedule 9 is the concurrent list for the federation, provinces and local levels.
The concurrent list for federation and provinces is Schedule:
- A) 9
- B) 8
- C) 7 ✔
- D) 6
Why: Schedule 7 is the concurrent list for the federation and provinces.
A grant given based on need and revenue capacity is the:
- A) Conditional grant
- B) Special grant
- C) Loan
- D) Fiscal equalisation grant ✔
Why: The fiscal equalisation grant is given based on each government's spending need and revenue capacity.
A grant for a specific programme with conditions is the:
- A) Conditional grant ✔
- B) Equalisation grant
- C) Matching grant only
- D) Revenue share
Why: A conditional grant is given for a specific programme and must be used under set conditions.
A grant where the receiving government must also contribute is the:
- A) Equalisation grant
- B) Complementary (matching) grant ✔
- C) Conditional grant only
- D) Special grant
Why: A complementary (matching) grant requires the receiving government to contribute its own share.
A grant for special programmes such as backward areas is the:
- A) Equalisation grant
- B) Revenue share
- C) Special grant ✔
- D) Complementary grant
Why: A special grant funds special programmes, such as for backward areas or particular groups.
The share of VAT and internal excise kept by the federal government is:
- A) 50%
- B) 60%
- C) 85%
- D) 70% ✔
Why: The federal government keeps 70% of VAT and internal excise.
The share of VAT and internal excise given to provinces is:
- A) 15% ✔
- B) 25%
- C) 10%
- D) 30%
Why: Provinces get 15% of VAT and internal excise.
The share of VAT and internal excise given to local levels is:
- A) 25%
- B) 15% ✔
- C) 10%
- D) 5%
Why: Local levels get 15% of VAT and internal excise.
Royalty from natural resources goes to the federation, provinces and local levels in the ratio:
- A) 70:15:15
- B) 60:20:20
- C) 50:25:25 ✔
- D) 40:30:30
Why: Royalty from natural resources is shared 50:25:25 among the federation, provinces and local levels.
The federal budget is presented on:
- A) Ashadh 1
- B) Ashadh 10
- C) Shrawan 1
- D) Jestha 15 ✔
Why: The federal budget is presented on Jestha 15 every year.
Provincial governments present their budget on:
- A) Ashadh 1 ✔
- B) Jestha 15
- C) Ashadh 10
- D) Shrawan 1
Why: Provincial governments present their budget on Ashadh 1.
Local levels present their budget on:
- A) Jestha 15
- B) Ashadh 10 ✔
- C) Ashadh 1
- D) Shrawan 15
Why: Local levels present their budget by Ashadh 10.
The gap between spending responsibilities and own revenue of a level is:
- A) Horizontal fiscal imbalance
- B) Trade deficit
- C) Vertical fiscal imbalance ✔
- D) Inflation
Why: Vertical fiscal imbalance is the gap between a level's spending responsibilities and its own revenue.
Differences in revenue capacity among provinces are called:
- A) Vertical fiscal imbalance
- B) Budget surplus
- C) Deflation
- D) Horizontal fiscal imbalance ✔
Why: Horizontal fiscal imbalance is the difference in revenue capacity among governments at the same level.
Musgrave's three functions of public finance are allocation, distribution and:
- A) Stabilisation ✔
- B) Privatisation
- C) Taxation only
- D) Borrowing
Why: Musgrave's three functions of public finance are allocation, distribution and stabilisation.
The idea that services should be provided by the lowest efficient level is:
- A) Say's law
- B) Oates' decentralisation theorem ✔
- C) Wagner's law
- D) Laffer curve
Why: Oates' decentralisation theorem says services should be provided by the lowest level that can do so efficiently.
Property tax in Nepal is collected by:
- A) Federation only
- B) Provinces only
- C) Local levels ✔
- D) NRB
Why: Property tax (house and land tax) is collected by local levels.
Vehicle tax is mainly a revenue source of:
- A) Local levels only
- B) Federation only
- C) Courts
- D) Provinces ✔
Why: Vehicle tax is a provincial revenue source, shared with local levels.
Customs duty is collected by the:
- A) Federal government ✔
- B) Local levels
- C) Provinces
- D) Ward offices
Why: Customs duty is collected by the federal government.
Income tax in Nepal is collected by the:
- A) Provinces
- B) Federal government ✔
- C) Local levels
- D) Ward offices
Why: Income tax is collected by the federal government.
The fund into which all federal revenue is deposited is the:
- A) Provincial Fund
- B) Local Fund
- C) Federal Consolidated Fund ✔
- D) Pension Fund
Why: All federal revenue goes into the Federal Consolidated Fund (Article 116).
Fiscal federalism aims to bring public services:
- A) Further from people
- B) Only to the capital
- C) Only to the rich
- D) Closer to the people ✔
Why: Fiscal federalism aims to bring public services closer to the people.
Provinces and local levels can borrow internally within limits recommended by the:
- A) NNRFC ✔
- B) Election Commission
- C) PSC
- D) Supreme Court
Why: Provinces and local levels may borrow internally within limits recommended by the NNRFC.
Most of the revenue in Nepal is collected by the:
- A) Local levels
- B) Federal government ✔
- C) Provinces
- D) Ward offices
Why: Most revenue in Nepal, such as VAT, income tax and customs, is collected by the federal government.
Transfers from the federal government to provinces and local levels are called:
- A) Foreign aid
- B) Remittance
- C) Intergovernmental fiscal transfers ✔
- D) Royalty
Why: Grants and revenue shares from the federal government to lower levels are intergovernmental fiscal transfers.
Land revenue (malpot) is assigned in Nepal mainly to:
- A) Federation only
- B) NRB
- C) Courts
- D) Provinces and local levels ✔
Why: Land revenue (malpot) is assigned to provinces and local levels.
The divisible fund in Nepal consists mainly of:
- A) VAT and internal excise ✔
- B) Customs duty only
- C) Foreign grants only
- D) Fines
Why: The divisible fund consists mainly of VAT and internal excise, which are shared 70:15:15.
A key risk of fiscal federalism is:
- A) Too much local revenue
- B) Heavy dependence of sub-national governments on grants ✔
- C) No need for planning
- D) No accountability needed
Why: A key risk is that provinces and local levels depend heavily on federal transfers instead of their own revenue.
Fiscal autonomy means a government can:
- A) Print money
- B) Ignore the Constitution
- C) Raise and spend its own revenue ✔
- D) Avoid audits
Why: Fiscal autonomy means a government can raise and spend its own revenue.
Which level prepares the annual budget for a rural municipality?
- A) Federal Parliament
- B) Provincial Assembly
- C) Supreme Court
- D) Local level (municipal assembly) ✔
Why: A rural municipality's budget is prepared by the local executive and passed by its assembly.
The provincial budget is passed by the:
- A) Provincial Assembly ✔
- B) Federal Parliament
- C) Ward committee
- D) Supreme Court
Why: The provincial budget is passed by the Provincial Assembly.
A fiscal transfer formula usually considers:
- A) Only the number of politicians
- B) Population, area, poverty and revenue capacity ✔
- C) Only election results
- D) Random choice
Why: Transfer formulas usually consider population, area, poverty, infrastructure and revenue capacity.
Unspent conditional grants at the end of the year usually must be:
- A) Spent on anything
- B) Given to staff
- C) Returned to the giver ✔
- D) Ignored
Why: Unspent conditional grants usually must be returned to the government that gave them.
The tax on houses and land rented out is collected by:
- A) Federation only
- B) Provinces only
- C) NRB
- D) Local levels ✔
Why: Tax on rented houses and land (house rent tax) is collected by local levels.
Entertainment and advertisement tax are sources of revenue for:
- A) Local levels (and provinces as assigned) ✔
- B) Federation only
- C) NRB
- D) Courts
Why: Entertainment and advertisement taxes are local revenue sources (with provinces as assigned).
Revenue from natural resources such as hydropower, forests and mines is called:
- A) Customs
- B) Royalty ✔
- C) Remittance
- D) VAT
Why: Revenue from natural resources such as hydropower, forests and mines is royalty.
Nepal adopted federalism through the Constitution of:
- A) 2047 BS
- B) 2063 BS
- C) 2072 BS ✔
- D) 2019 BS
Why: Nepal became a federal state under the Constitution of Nepal, 2072.
Accountability in fiscal federalism improves when citizens can link:
- A) Taxes to foreign aid
- B) Nothing to anything
- C) Services to elections only
- D) Taxes paid to services received ✔
Why: When citizens see a link between the taxes they pay and the services they get, they hold governments more accountable.
The federal consolidated fund is provided in Article:
- A) 116 ✔
- B) 59
- C) 60
- D) 250
Why: The Federal Consolidated Fund is provided in Article 116.
Fiscal decentralisation means transferring to lower levels the power to:
- A) Make foreign policy
- B) Raise revenue and spend ✔
- C) Print currency
- D) Command the army
Why: Fiscal decentralisation gives lower levels the power to raise revenue and decide spending.