Fresh Fake VAT Bill Scam

'Firms created by a tax assistant helping large taxpayers evade VAT'

Published On: August 8, 2017 04:00 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, Aug 7: The Department of Revenue Investigation (DRI) recently found that a licensed tax assistant had set up three firms to create fake VAT bills through artificial transactions. 

Tax assistants are licensed by the Inland Revenue Department to assist taxpayers in preparation of their tax documents. But the recent case suggests that they have been helping taxpayers, including large taxpayers, to evade taxes.

Taxpayers paying taxes worth more than Rs 400 million annually are categorized as large taxpayers.

The firms set up by the tax assistant have no record of good purchases. They have sold goods to some large taxpayers. This suggest that they are working in the interest of the large taxpayers.

Banking transaction of firms that created fake Value Added Tax (VAT) bills shows that these firms have received payments for goods sold. Surprisingly, the amount is reimbursed to the buyers through informal banking channel, preliminary investigation conducted by the DRI reveals.  

According to DRI officials involved in investigation, such transactions are carried out in order to create fake VAT bills to serve the interest of large taxpayers.

DRI officials refused to reveal name of the firms and tax assistant involved saying that investigation is underway. But they say that the case is similar to the fake VAT bill scam worth Rs 7 billion dating back to 2010. Altogether 518 firms were involved in the scam.

Fake VAT bills would be a double whammy on the government, according to DRI officials. The taxpayers show the amount paid for artificial purchases as expenditure. This means their profit declines, and they pay less income tax to the government. But they will claim more VAT credit by showing fake VAT bills. As such artificial purchases are mostly related to fixed assets, they pay les VAT, causing the government to bear loss. 

VAT credit refers to difference between VAT that traders pay to the government and collect from the customers.“

"Investigation into the case is underway. But it is a very complicated cas”," Director General of DRI, Ram Krishna Subedi, told Republica.

 Acting on a tip-off, DRI raided firms of tax assistant at an undisclosed location outside Kathmandu Valley in mid June. The department has already questioned three employees of the firms. They have been released on generate date after they furnished bail amount of Rs 15 million last week. The department has also asked Nepal Police to arrest five other employees of the firms.

 DRI has collected files of about half a dozen large taxpayers who benefited from fake VAT bills issued by the firms run by the tax assistant. Investigative officers of DRI are currently studying the files. “

"In the fake VAT bill case of 2010, only fake VAT bills were produced. But in this fresh case, payment for procurement of goods has also been made to make the case more complicated," an official involved in the investigation told Republica.

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