The data of Company Registrar´s Office (CRO) shows the country has more than 80,000 companies registered as commercial ventures. [break]
Of them, only 56,547 companies, including 918 public limited companies, are in the tax net, according to Inland Revenue Department´s (IRD´s) record.
However, only about 185 of them have their shares listed and traded at Nepal Stock Exchange (Nepse). Others can deal on their shares and transfer ownerships as they wish, and they need not approach any authority to get their transactions certified and approved.
As a result, IRD - the agency supposed to enforce CGT - remains fairly unaware of such ownership transfer. The privately owned companies are not just small scale trading and medium scale manufacturing and service enterprises. More than 90 percent of large taxpayers of the country are private firms, shows IRD´s data.
“This means we could lose substantial revenue anytime, and still remain unaware of it,” admitted Khum Raj Punjali, deputy director general of IRD.
IRD became aware of such possibility only when the Khetan Group sold some 2.3 million units of their shares in Gorkha Brewery to Carlsberg Group about a month ago. The transaction was valued about Rs 3 billion, and the Khetan Group had paid over Rs 265 million in CGT.
“Fortunately, the transaction attracted media attention, giving us a basis to inquire for the settlement of tax liability. Otherwise, we could have easily missed it” said another official at IRD.
The Company Act asks the promoters to notify any change in status, ownership and business undertakings of the firm to the registrar´s office. Large companies do inform such changes as well, but as the Act does not compel promoters to disclose the change in company´s net worth and the rate at which shares were divested, they do not disclose such crucial details.
Nonetheless, hoping to tap this only available window to trace ownership transfers, IRD, a couple of weeks ago, requested CRO to add a new rule, making submission of tax clearance certificate compulsory to get any change in ownership structure updated.
IRD was hopeful that the move would compel the promoters of private firms to inform the tax office about their share transactions. However, CRO refused to incorporate its request in its operating manual, citing legal barricade.
“Our (Company) Act simply does not mandate us to seek such information from the companies. It does not match with the objective and spirit of this office as well.” This is how CRO responded to IRD´s request.
Keshab Bahadur Thapa, acting chief company registrar, too echoed that the office´s job was just to maintain company´s record as endorsed and informed by the company´s board of directors. “We cannot impose additional procedural hassles to them,” he added.
Given the response, IRD is again asking CRO to implement its request, even if that calls for changes in its law. But as mere instruction from IRD would not be enough for CRO to amend its governing law, concerned officials admit that the government will have to take up the issue seriously and put in place a convincing mechanism to plug possible tax evasion.
Related story
Try these food items to whiten your teeth naturally!
