Private sector tried to prolong life of controversial tax settlement body

Published On: August 1, 2017 07:47 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, July 31:The private sector has  attempted at least twice to get  the  Tax Settlement Commission extended or a new commission formed. The controversial body has drawn huge criticism and also seen court cases involving a record high amount in corruption. 

A first such attempt was made  to extend the deadline of the ad hoc commission led by Lumba Dhoj Mahat by at least a month in October 2015, on the  ground that taxpayers who got  tax waivers did not have sufficient time to pay off the tax and  settle the matter. The   extension was sought citing the effect of  the earthquakes in 2015. 

The business community had persuaded then minister for finance Bishnu Paudel about the need for the  extension but they did not succeed as almost all  key Ministry of Finance (MOF) officials rejected the proposal, said a source at the ministry. 

The taxpayers had not yet paid about Rs 3.26 billion into  state coffers to seal the tax settlement  by the commission.  Of the Rs 9.55 billion tax settlement only Rs 6.29 billion had been paid. The taxpayers did not have time to pay the remaining Rs 3.26 billion and the  settlement for this amount is  yet to be implemented. This means their tax issues remain  and they have to pay up the tax  as assessed origionally or go through with the process of legal remedy, according to the 54th annual report of the Office of the Auditor General (OAG). 

The Commission for  Investigation of Abuse of Authority (CIAA) has filed a corruption case involving Rs 10.02 billion against Mahat and two other members of the commission-- Chudamani Sharma and Umesh Prasad Dhakal-- for  waiving the taxes illegally. 
The commission whittled down the tax liability of Rs 30 billion to Rs 9.55 billion, providing the taxpayers a discount of Rs 21 billion. 

In April, the  Federation of Nepalese Chambers of Commerce and Industry (FNCCI) registered an application at  MoF seeking the formation of a similar commission again. They were lobbying for the commission just  18 months after the previous commission's term ended. There is no set criteria for triggering the formation of a new commission.

The application was filed only a few days before the Office of the Auditor General (OAG)  on April 13 disclosed  massive irregularities in the tax settlement by the previous commission. 

OAG disclosed irregularities  including  waiver of value added tax and the basic tax amount, on top of waiver of  fines and interest. Similarly, private companies were treated leniently while  a hard stance was taken in the case of  public enterprises. The commissions' tax settlements were kept secret and even the OAG was denied information, citing  secrecy provisions.    

At a revenue consultation committee meeting held in Bhairahawa in April, the FNCCI had presented a memorandum to then minister for finance  Krishna Bahadur Mahara seeking the setting up of a commission once again. 

Then FNCCI president Pashupati Murarka and other business leaders who spoke at the meeting asked the government for the new commission.  Mahat was also positive towards the idea but officials at the ministry  objected. 

Also speaking at the meeting, erstwhile revenue secretary Rajan Khanal had said that business people should not always look for discounts and waivers but  pay  tax to the government as per the law. 

Talking to Republica on Monday, Murarka said, “We now want a permanent and independent tax settlement commission like in many other countries to settle tax disputes because we can no longer wait for lengthy legal remedies as well as deposit a whopping 50 percent of the  tax dispute amounts.”

As Parliament's Finance Committee has now instructed that the Tax Settlement Act  1976  be scrapped, there may be little chance of such a commission coming into being again anytime soon.

The private sector has also been  criticized for influencing commission members to secure whopping tax discounts to the detriment of the state coffers.  

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