KATHMANDU, July 31:The private sector has attempted at least twice to get the Tax Settlement Commission extended or a new commission formed. The controversial body has drawn huge criticism and also seen court cases involving a record high amount in corruption.
A first such attempt was made to extend the deadline of the ad hoc commission led by Lumba Dhoj Mahat by at least a month in October 2015, on the ground that taxpayers who got tax waivers did not have sufficient time to pay off the tax and settle the matter. The extension was sought citing the effect of the earthquakes in 2015.
The business community had persuaded then minister for finance Bishnu Paudel about the need for the extension but they did not succeed as almost all key Ministry of Finance (MOF) officials rejected the proposal, said a source at the ministry.
The taxpayers had not yet paid about Rs 3.26 billion into state coffers to seal the tax settlement by the commission. Of the Rs 9.55 billion tax settlement only Rs 6.29 billion had been paid. The taxpayers did not have time to pay the remaining Rs 3.26 billion and the settlement for this amount is yet to be implemented. This means their tax issues remain and they have to pay up the tax as assessed origionally or go through with the process of legal remedy, according to the 54th annual report of the Office of the Auditor General (OAG).
"Tax Settlement Commission itself was against law"
The Commission for Investigation of Abuse of Authority (CIAA) has filed a corruption case involving Rs 10.02 billion against Mahat and two other members of the commission-- Chudamani Sharma and Umesh Prasad Dhakal-- for waiving the taxes illegally.
The commission whittled down the tax liability of Rs 30 billion to Rs 9.55 billion, providing the taxpayers a discount of Rs 21 billion.
In April, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) registered an application at MoF seeking the formation of a similar commission again. They were lobbying for the commission just 18 months after the previous commission's term ended. There is no set criteria for triggering the formation of a new commission.
The application was filed only a few days before the Office of the Auditor General (OAG) on April 13 disclosed massive irregularities in the tax settlement by the previous commission.
OAG disclosed irregularities including waiver of value added tax and the basic tax amount, on top of waiver of fines and interest. Similarly, private companies were treated leniently while a hard stance was taken in the case of public enterprises. The commissions' tax settlements were kept secret and even the OAG was denied information, citing secrecy provisions.
At a revenue consultation committee meeting held in Bhairahawa in April, the FNCCI had presented a memorandum to then minister for finance Krishna Bahadur Mahara seeking the setting up of a commission once again.
Then FNCCI president Pashupati Murarka and other business leaders who spoke at the meeting asked the government for the new commission. Mahat was also positive towards the idea but officials at the ministry objected.
Also speaking at the meeting, erstwhile revenue secretary Rajan Khanal had said that business people should not always look for discounts and waivers but pay tax to the government as per the law.
Talking to Republica on Monday, Murarka said, “We now want a permanent and independent tax settlement commission like in many other countries to settle tax disputes because we can no longer wait for lengthy legal remedies as well as deposit a whopping 50 percent of the tax dispute amounts.”
As Parliament's Finance Committee has now instructed that the Tax Settlement Act 1976 be scrapped, there may be little chance of such a commission coming into being again anytime soon.
The private sector has also been criticized for influencing commission members to secure whopping tax discounts to the detriment of the state coffers.
