Do you drill axle holes before or after painting?

Drilling Hook Clearance  For A Handmade Wooden Tow Truck 

I usually like to drill before I cut the pattern on my scroll saw, but there are plenty of exceptions.

I can while the wood is square and easy to handle. The hole in the photo would be nearly impossible to drill after the truck body had been cut.

If I cut before drilling, I find that holes near the edge can tear out easily. Such tear out is not easily repairable and the toy ruined.

When using axle pegs, I drill first and ream the holes to exact size with a drill after I'm finished painting. This clears the holes of paint and removes any swelling in the wood cause from using water-based acrylic paint. Sometimes the paint will get chipped around the holes but since they are behind the wheels where you can't see. It's not a big deal. For regular axles that go all the way through it doesn't matter much since the hole are a good bit larger than the axle.

For lighter toys, I use dowels for handles.  I insert dowels into the axle holes to provide a grip to use while painting. If I drilled after painting, I would need to develop a new painting technique.

I sometimes make toys that are drilled to accept peg dolls. I usually drill these after they are painted. I find that they are difficult to get straight if I drill them before the car is assembled. I find painting inside the holes to cause swelling of the wood that will sometimes cause the peg dolls to fit tight. Besides, I like the way it looks with the raw wood exposed in the hole. I use tape such as painters tape to help keep the paint from chipping. Go slow and careful with a sharp bit and you with get a clean, sharp edge.

For regular axles that go all the way through it doesn't matter much since the hole are a good bit larger than the axle.