CIAA arrests IRD head over tax waivers

Published On: June 3, 2017 07:36 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 2: The Commission for the Investigation of Abuse of Authority (CIAA) has arrested Inland Revenue Department Director General Chudamani Sharma on the charge of  multiple involvements in corruption while fixing the tax liabilities of large industrial entities.

A highly-placed source at the anti-graft body confirmed that DG Sharma was arrested on Friday afternoon from his office after multiple complaints were lodged against him. Other CIAA officials confirmed the arrest but declined to be named. In the past the CIAA used to issue formal statements in such cases. 

The complaints against Sharma  accused  him of corruption to the tune of millions in state funds  through waiver of taxes for various firms.
“We have taken him into our custody. A CIAA team is investigating the allegations,” said the CIAA source.

This is the first high-profile action taken by the anti-graft body since Deep Basnyat took  charge of the anti-corruption watchdog. 

DG Sharma, according to CIAA, was accused of involvement in not recovering tax from Ncell, in waiving tax for the business community and accumulating property worth millions through abuse of  authority.

Sharma, who was initially silent in the Ncell tax scam, started advocating for recovery of the tax from seller TeliaSonera after the latter left the country. Sharma’s term in office is said to have been dogged by controversy.

Sharma allegedly helped TeliaSonera, the seller of Ncell, to walk away without  paying capital gains tax in share transfers  of US$ 1.03 billion. On an application by  buyer Axiata whether CGT was the buyer’s liability, IRD remained silent, and TeliaSonera left the country. After Teliasonera’s exit, Sharma told  the parliamentary Public Accounts Committee  that it was the seller that had to pay CGT as per income tax law. At the same meeting, Sharma made a commitment to assess the CGT and recover it within three months (by mid-April). But no progress has been made so far. 

On the issue of recovering tax from Ncell, the Public Accounts Committee had directed the CIAA to take action against tax officials who were found dillydallying. The CIAA was not responsive to the PAC’s repeated inquiries why action was not taken against the officials, including Sharma.

Also, Sharma was a member of the Tax Settlement Commission, which whittled down  tax liabilities amounting to Rs 30.52 billion to Rs 9.54 billion for purportedly resolving disputed tax cases. The commission was formed by then finance minister Ram Sharan Mahat.
Commenting on the tax settlements, the Office of the Auditor General in a recent annual report  questioned the rationale for the commission. It said that the settlements were not in cases of disputed tax assessment or in cases under review in court but were only instances of taxpayers simply not paying   their taxes dues. “The commission was formed to free taxpayers from tax liability and it was a wrong precedent,” reads an excerpt of the report unveiled mid-April.

Out of 1,726 applications registered at the commission seeking tax waiver in 2071 BS, it whittled down the taxes for 1,069 applications.
Meanwhile, CIAA officials  have started  recording Sharma’s  statement. “The statement recording is  still under way and things will become clear once the investigations are completed,” said the source.

Asked about Sharma’s involvement in the Ncell tax scam, the source said officials are investigating  multiple accusations. “We cannot say anything right now about his involvement nor deny anything,” said the source.

Sharma was considered close to Lokman Singh Karki when the latter was CIAA chief. Sources familiar with the Lokman saga say Sharma acted on Karki’s behest when the latter operated to silence  opponents, it is stated.

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