KATHMANDU, Mar 16: Despite clear direction of the Parliamentary Accounts Committee (PAC) to investigate and penalize responsible authorities for not recovering capital gains tax (CGT) from the seller of GSM operator Ncell, concerned authorities, after 10 months of the shares transfer, are arguing on who should pay the CGT.

According to domestic and international laws, the CGT has to be paid by the seller.

Though PAC, on May 29, wrote to the Commission for the Investigation of Abuse of Authority (CIAA) to investigate the transaction from the very beginning and penalize the officials responsible, neither the CIAA nor the government has heeded the PAC directive.

The government could lose the CGT if the dilemma and misinterpretation of the law continues any further.

Albeit late, the cabinet last week decided to recover capital gains tax (CGT) from the seller i.e. Swedish telecom operator TeliaSonera on the basis of decision of the Public Accounts Committee (PAC) of May 29 and Finance Committee of June 3. 

Malaysian telecom giant Axiata had bought Reynolds Holding, which held a majority stake in Ncell, from TeliaSonera at around US$ 1.03 billion in April last year. Reynolds Holding was TeliaSonera's wholly-owned subsidiary registered at Saint Kitts and Nevis -- a tax haven.

The TeliaSonera had sold its entire stakes in Ncell as part of its strategy to exit Asian and former Soviet markets to focus on Europe and its home Nordic region. The Swedish firm had sold a 60 percent stake in Ncell and also dissolved its interest in an additional 20 percent stake owned by local partner in December 2015. 

Ncell officially became a part of Axiata Group Bhd on April 12, 2016.

But the Nepali taxmen started an initiative to tax the transaction only after TeliaSonera exited Nepal. 

The largest transaction in Nepali corporate history has been in news -- affecting Ncell's plan to rollout 4G services -- also due to some of the responsible government officials, including director general of Inland Revenue Department Chudamani Sharma, who have been saying that TeliaSonera does not need to pay CGT in Nepal. Likewise, TeliaSonera has also been claiming that there is no need to pay CGT in Nepal since the transaction had taken place elsewhere.

Responding to an email query of Republica, Johanna Hansson, press officer of TeliaSonera, said recent reports in Nepali media do not change TeliaSonera's view on the tax situation. "We are still of the firm belief that Telia should not pay CGT on the international part of the transaction relating to the sale of Ncell," she added.

 
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