Tax office says Ncell dues will make up for around half of the revenue target shortfall

  • The mobile firm, authorities say, has not responded to the seven-day deadline to pay capital gains tax

Apr 17, 2019-

The decision by the Large Taxpayers Office on Tuesday giving Ncell and Axiata seven days to pay Rs39 billion in capital gains tax comes at a time when the government is struggling to meet its revenue target. But that is no coincidence, according to senior tax officials, who say the money would help cover up the deficit.

The decision to give a strict seven-day deadline came a week after the Supreme Court issued the full text of its February verdict, ordering the authorities to collect capital gains tax from the private sector mobile company and its parent firm within three months.

Officials at the tax authority said they asked the telecom company to clear dues within seven days because no further deliberation was required after the Supreme Court had discussed the issue at length.

“Another reason to fast-track the process of recovering capital gains tax from Ncell and Axiata is certainly to make up for the revenue shortfall,” a senior official at the Inland Revenue Department, a body responsible for collecting income tax, told the Post on condition of anonymity. 

The Inland Revenue Department and the Department of  Customs, which are responsible for collecting most of the revenues for the federal government, have reported a combined revenue shortfall of Rs67 billion against the target this year.

The revenue department, which was given the target of collecting Rs282.94 billion as of mid-April, has only been able to raise Rs246.96 billion. The Customs Department has collected Rs270 billion against the target of Rs301.14 billion during the same period, according to statistics available from both the government agencies.

However, the head of the Large Taxpayers Office denied that there was any pressure from the Finance Ministry or the Inland Revenue office to fast-track the Ncell tax process in the wake of the government’s failure to meet its revenue target.

“A tax office has the full authority to take decisions on such matters,” said Dhaniram Sharma, the chief of the office. He, however, agreed that Rs39 billion from the mobile company would contribute significantly to make up for the revenue deficit.

“It’s true that it will help the government meet the revenue target,” he said. 

The swift decision to set the one-week deadline to clear dues appears to have been prompted by criticism that government agencies had been too slow to act as well as meet the revenue target.

Despite big promises by the KP Sharma Oli government, particularly by his technocrat Finance Minister Yubaraj Khatiwada, progress on the economic front has been poor—whether it is tax collection or capital expenditure.

With three months to go for the current fiscal year to end, capital expenditure, which creates economic activities, is just 35 percent of total allocated amount as of April 16, according to the Financial Comptroller General Office. Of the Rs313.99 billion capital expenditure budget, spending as of Tuesday stood at Rs110.37 billion.

Soon after assuming office, Khatiwada had issued a white paper painting a bleak picture of the country’s economy. But during his budget speech, he set the economic growth target of 8 percent and a revenue target of Rs945.55 billion.

But more than a year later—and as the fiscal year draws to a close—the country’s economy has largely failed to make an impressive leap.

Former auditor general Bhanu Acharya said the revenue target was so ambitious that the government was never going to meet it.

“There is no impressive growth in remittance and the capital expenditure of the government has been poor as always, which is affecting the consumption that contributes to revenue,” said Acharya, who is also the former finance secretary.

Officials at the Inland Revenue Department and Customs Department admitted that they were unable to meet the target because it was increased by a whopping 35 percent.

“Nonetheless, the revenue growth rate is better than that of last fiscal year and is reflective of economic activities in the country,” an official at the Customs Department told the Post on condition of anonymity because he was not authorised to speak to the media.

If Ncell and Axiata pay the outstanding dues, the government will be able to make up for around half of the shortfall in revenue collection.

“But the two companies are yet to respond, even though a letter asking them to clear the dues was sent to them on Tuesday,” said Sharma, the chief of the Large Taxpayers Office. “If they don’t pay the tax by the deadline, we will follow up. But they will be levied interest if they miss the deadline.”

The Large Taxpayers Office on Tuesday determined the capital gains for Ncell and Axiata at Rs63.63 billion and ordered the telecom companies to pay Rs39 billion after deducting the already paid Rs23.57 billion.

Ncell had paid a total of Rs 21.54 billion as capital gains tax and Rs 2.32 billion as a late fee to the Large Taxpayers Office.

TeliaSonera, which earlier owned Ncell, exited the country after selling the company to Axiata in 2016, in the biggest deal in Nepal’s corporate sector.

But the tax authority had only initiated the process to collect capital gains tax in the buyout deal after TeliaSonera exited Nepal.

Published: 18-04-2019 07:00

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