KATHMANDU, July 17: Parliament's Finance Committee has directed the government to start a process to scrap the Tax Settlement Commission Act, 1976. A meeting of the committee held on Monday directed the government to immediately start the process and inform the committee about its progress.
The committee had Thursday called for the amendment and updating of the Panchayat-era law but changed its tune on Monday and instructed the government to scrap the act altogether.
The fresh decision comes in the wake of widespread criticism of the committee for taking a lenient approach to the act, thereby providing leeway for massive irregularities and corruption while providng tax waivers of staggering amounts to various companies.
“Since there is no longer any rationale for amending the act, we have corrected our earlier decision and instructed the government to simply scrap it,” Prakash Jwala, chairperson of the committee, told Republica.
Then finance minister Ram Sharan Mahat had formed the 11th tax settlement commission and it had submitted its report to the government in December 2015. It later came to light that the commission had provided huge tax waivers to various companies. Concerns were raised about the possibility of massive irregularities while giving hundreds of firms huge tax waivers. According to the 54th report of the Office of the Auditor General in April, the commission whittled down tax liabilities amounting to Rs 30.52 billion to just Rs 9.54 billion. The report pointed out that several straightforward and very recent tax liabilities were also unnecessarily handled by the commission.
Speaking at the meeting, members of the committee said that the authority of the commission formed on the basis of the Tax Settlement Commission Act had been misused.
“The spirit of the act is not wrong as it is aimed at companies whose promoters have already died and at sick industries which cannot meet their tax liabilities,” said lawmaker Jagadishwar Narsingh KC. “As the tax waivers have gone to big companies that should have paid their fair share of tax, there is room for suspicion that money has been extracted from them for personal benefit and at cost to state coffers. Such an act must be scrapped immediately,” he said.
Meanwhile, the parliamentary committee has also formed nine-member sub-committee to investigate irregularities in tax settlements and make recommendations for reform in tax administration. The sub-committee has been told to furnish its report with two months.