Tax Dodgers in Nepal to face stern action

KATHMANDU, JAN 11 -

 

After failing to attract expected number of tax payers under a special scheme that offers a certain tax exemption, the government on Friday said it will take stern action against tax evaders.

 

The Financial Ordinance 2013 has offered different levels of tax exemptions to different types of tax payers, provided they pay outstanding tax es within mid-January 2014. The targeted tax payers are private institutions, small traders, cooperatives, professionals and other individuals. The scheme has been designed for both income tax payers and VAT payers.

 

Under the scheme, tax payers who have registered with tax office for years have been allowed to register by paying the tax for the last two years only. Although the private sector has been demanding an extension to the deadline, the government on Friday made it clear the deadline will not be extended, warning of a sterner action after the deadline ends.

 

Speaking at an interaction with the regulators such as Insurance Board and Securities Board of Nepal, Finance Minister Shankar Prasad Koirala told those not responding to the government’s scheme not to expect a deadline extension. “After the current deadline ends, the revenue authority will reach to your doorstep to take a legal action,” he said.

 

According to the Inland Revenue Department (IRD), around 4,400 small traders having annual transaction of less than Rs 2 million, who were facing problem of mismatch in tax records, were supposed to avail facility. “But only 1,000 such traders have come forth,” said IRD General Director Tanka Mani Sharma.

 

Under programme, traders have been asked to pay income tax for fiscal year 2010-11 and 2011-12 

within mid-January 2014 to get exemptions in tax , fees and interest. The facility was announced after traders’ complaints about record mismatch.

 

According to the IRD, only around 600 professionals took the benefit of the scheme, IRD officials termed disappointing. The Financial Ordinance has told the professionals—who are liable to pay tax es but have not acquired Personal Account Number (PAN) and have failed to pay income tax until fiscal year 2011-12—to pay the tax es for fiscal year 2010-11 and fiscal year 2011-12 within mid-January 2014. If they do so, they will be exempted from paying income tax es for previous fiscal years, fee and interest. 

 

Sharma said although there are some 30,000 cooperatives, only 15,000-16,000 have been registered with the tax authority.

 

He said those failing to apply for the current facility will be penalised and asked to pay their entire tax liability. 

 

During the interaction, government officials asked the regulators to help increase the number of tax payers as well as recover tax es through a mechanism under 

which transactions of tax payers would be affected if they fail to clear their tax es.

 

 Finance Minister Koirala asked the regulator to make mandatory that those seeking to register with the regulator should first register with the tax authority.

 

 Finance Secretary Shanta Raj Subedi asked the regulators to tell their licensees that they would not be able to defend them if the tax authority initiates action.

Source: ekantipur.com, Jan 11th 2014

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Service Sector is Highest Tax payer in Nepal

KATHMANDU, Dec 31: Nepal Telecom (NT) became the largest contributor to income tax in fiscal year 2011/12, paying Rs 6,015 million. Given the sluggish performance of the manufacturing sector, the service sector has dominated the top-10 list of largest contributors to income tax, according to a confidential source.

Ncell-- a multinational telecom firm--became the second largest income tax contributor, paying Rs 4,970 million. The Agricultural Development Bank Ltd ( ADBL) is the largest bank and third largest company, and it paid Rs 1,656.7 million in income tax during the year.

Surya Nepal --an Indo-Nepal-UK joint venture and subsidiary of ITC Ltd--has emerged the fourth largest contribution to income tax, paying Rs 1,654.4 million.
Surya Nepal is involved in manufacturing and marketing cigarettes as well as readymade garments in Nepal, besides exporting the apparel.
At a time when the country is facing a yawning trade deficit and a slowing manufacturing sector, Surya Nepal became the largest manufacturing industry. The fifth to 10th positions have been secured by commercial banks.

Foreign joint ventures Nabil Bank-- the first foreign joint venture bank in the country, Nepal Investment Bank and Himalayan Bank secured fifth, sixth and seventh positions, contributing Rs 1,150 million, Rs 1,050 million and Rs 847.2 million respectively. Two other joint venture commercial banks--Everest Bank and Standard Chartered -- are eighth and ninth ranking contributors, paying income tax of Rs 847 million and Rs 730 million respectively.

State-owned commercial bank Rastriya Banijya Bank stood in 10th position, paying income tax amounting to Rs 620 million.
As per existing law, banks, corporate houses and industrial entities have to pay 30 percent, 25 percent and 20 percent respectively of their profits as income tax. Only Surya Nepal--the sole firm from the manufacturing sector--being included in the top income tax-payer list, highlights the weak contribution of this sector to the national coffers.

Data compiled by the Central Bureau of Statistics (CBS) shows the growth of the manufacturing sector limited to 3 percent in 2010, 4.1 percent in 2011, 3.6 percent in 2012 and a projected at 1.8 percent for 2013.

With the manufacturing sector slowing down consistently, its contribution to Nepal´s gross domestic product (GDP) has been hovering between 6.7 percent and 6.9 percent over the last five years.

However, the service sector´s contribution to GDP stood at 49.5 percent during both fiscal years 2011 and 2012, while 50.6 percent contribution is projected for 2013. “Significant reforms in policies effected in the service sector over two decades are the major factor behind the mammoth growth of this sector and its contribution to national revenue,” Dr Chiranjibi Nepal, Chief Economic Advisor of the Ministry of Finance, told Republica on Tuesday. Contribution of the service sector in the global economy hovers around 70 percent.

Source: myrepublica.com, 31st Dec 2013
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