Issues With Identifying low-Income Households
There is no nation in the world where every citizen is rich, free from shortages, or devoid of weak purchasing power. For this reason, poor and rich families exist in every country. Furthermore, in every country, the number of rich people is small, whereas the number of poor people is large. This occurs due to individuals' intellectual capabilities and government shortcomings, among other possible reasons.
Because the population of poor people is large, governments collect higher taxes from the wealthy. Through national income redistribution, governments direct those tax revenues to poor families via various channels (such as elderly allowances, maternity allowances, widow allowances, subsidized education loans, unemployment benefits, and financial assistance for serious medical treatments). To deliver financial assistance to poor families, governments develop various mechanisms to identify who is poor and who is not.
In developed nations, tax filing is used as an effective mechanism to distinguish between the rich and the poor. In those countries, all individuals—whether earning an income or not—are required to submit a "tax return" to the Ministry of Finance or a designated office within the fiscal year or specified period, stating how much income they earned (or did not earn) over the year. Provisions exist to file these tax returns individually or as a family.
Based on the received tax returns, the government can determine how much income a person or family earned throughout the year. It can also see how much tax that individual or family paid based on their income. Based on the earned income or the tax paid to the government, authorities can easily identify whether an individual or family is poor or rich. Submitting accurate income details is mandatory for individuals or families.
An individual or family that pays higher taxes to the government is considered wealthy. Conversely, an individual or family that pays very little or no tax (due to lack of earnings) is considered poor. In this way, the government can easily identify who is poor and who is rich based on the tax payment returns submitted.
Once the government determines who is genuinely poor based on tax records, it provides financial assistance to those individuals or families. This system makes it easy for the government to extend financial support to the poor within its population, while rich individuals or families have no opportunity to claim that they are poor.
In our country, there is no effective system or mechanism to distinguish who is poor and who is rich. Because of this, the government faces difficulties in delivering financial assistance to the poor. Whenever the government plans to distribute any form of financial support, wealthy individuals or families also claim to be poor. As a result, the rich—who do not need government aid—manage (or may manage) to receive government support.
For example, in Nepal, if the government plans to distribute NPR 10,000 to each poor family as Dashain expenses with the intention of helping low-income households, wealthy families might also claim to be poor to receive that assistance. They can put forward strong claims to get that aid. On the other hand, since the government lacks a system to separate the poor from the rich, a situation may arise where the government has to distribute money to everyone who demands it. Although an individual or family's wealth could be assessed based on their assets (land and buildings), this method is not effective. Someone could claim that their land or building belongs to another person or submit false details.
The absence of a strong mechanism to identify poor individuals or families in Nepal is precisely why balancing national income distribution has become difficult. It has created problems in providing financial assistance to poor families. Not only that, but during natural disasters such as earthquakes, floods, landslides, droughts, and fires, providing financial support to poor families becomes challenging. Recently, following the disaster in Nepal (damage caused by flooding in the Bhotekoshi, Trishuli, and Lhende rivers), the government may find it difficult to identify how many poor families were affected, creating obstacles to providing appropriate financial support.
To balance national income distribution and support poor individuals and families during disasters, it is essential for the government to develop a mechanism that can identify who is poor.
When the government attempts to provide basic needs like education and health services to poor families, wealthy families end up availing those benefits as well. Wealthy families have also been observed successfully receiving free healthcare services.
By making it mandatory for individuals or families to submit details of their annual income (salaries, wages, profits, etc.) to a designated authority, identifying poor individuals or families will become easier, allowing financial aid to be provided accordingly. Linking an individual's annual income to their citizenship number (or an account associated with that number) could also serve as a way to identify poor families and recognize who is wealthy and does not require financial assistance.
Financial assistance can only be effectively delivered once poor households in the country are properly identified—and poor families must be supported. Ultra-poor individuals or families (those without shelter or regular income) can be assisted through such a system. Poverty in Nepal can be reduced, and the situation where people are forced to go abroad for employment can be improved.
In any country, the number of poor people is substantial. Unlike the rich, poor people lack equal access to the means of production—land, capital, and organization. Consequently, the population of poor individuals remains large. For various reasons, many people are unable to earn adequate income. For these reasons, the government must take measures to provide financial assistance to poor families.
Bishwa Raj Adhikari
akoutilya@gmail.com
Published in Prateek Daily: Friday, September 25, 2026
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