Under VDIS, the Finance Ministry and Minister of Finance Dr Babu Ram Bhattarai had declared, those who disclose their "undisclosed" incomes [break] and pay 10 percent tax will get a chance to bring their assets and liquidity within a legal framework. "The government will grant complete amnesty to the disclosers and will neither investigate their sources nor raise questions over their legality," Dr Bhattarai had declared in the budget. He even promised that a new Act will protect the interests of VDIS taxpayers.
However, the anti-graft constitutional body has said it could still investigate the income statements and sources if it smelled any rat in the details.
"This special authority is granted to us by Article 20 of the Corruption Control Act. If the government wants us not to investigate such cases, it will have to revoke that article," said Lalit Bahadur Limbu, acting chief of the CIAA.
But given that Article 20 is the heart and soul of the Act, it is unlikely that the government press for the change.
The article empowers the anti-corruption watchdog to file a case and unearth further details if it suspects that assets were amassed through corruption or other illegal means. Insisting on this very clause, the CIAA had in 2001 refused to grant legality to the VDIS scheme the government unveiled then.
As a result, over 5,000 people who disclosed some Rs 6 billion worth of property and paid some Rs 600 million in tax to the government found that their income status remained unchanged. Contrary to the government’s assurance, the CIAA had even forced the Inland Revenue Department to furnish it with details about some of the taxpayers and built cases on these.
"We will not allow conversion of black money into white just because he/she paid 10 percent tax to the government -- this was our stance in the past and it is the same now," said Limbu.
Kapil Dev Ghimire, Director General of Inland Revenue Department (IRD), said that VDIS was a program announced with a view to give an opportunity to people to correct their past behavior of not paying tax.
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"It is not meant to give a clean cheat to wrongdoers," he said, adding that the department was committed not to disclose information that taxpayers pledge to it voluntary. "A provision for amnesty is clearly cited in the Financial Act. Hence taxpayers need not worry."
However, given past experience and the continuing legal ambiguity, taxpayers have cold shouldered the government’s scheme so far.
Data at IRD shows that only two people have disclosed their incomes under the scheme to date. That has fetched the government Rs 270,000.
Officials said if the confusion is not cleared soon, the scheme will fail to fetch the additional Rs 1 billion in revenue targeted by the government.
To build public confidence IRD has, meanwhile, has sent letters to potential taxpayers, requesting them to take advantage of the scheme. "Letters have mainly been sent to individuals and institutions related to 10 different sectors," said Ghimire. IRD has also warned of action against those who pay no heed to its request.
