Taxman exceeds goal in slashing VAT defaults

  • But it was less successful in reducing the number of income tax defaulters
- POST REPORT, Kathmandu
Taxman exceeds goal in slashing VAT defaults

Nov 18, 2014-

The government’s drive to bring down the number of value added tax defaulters surpassed expectations in the last fiscal year, but it was less successful in reducing the number of income tax defaulters, said the annual report of the Inland Revenue Department (IRD).

As per the report, the government was able to slash the number of VAT defaulters by 7,736 against the target of 4,648. However, the reduction in the number of income tax defaulters reached 2,248, well short of the goal of 4,272.

Similarly, the taxman exceeded the target in recovering outstanding VAT and income tax by a wide margin. According to the IRD, it recovered Rs 4.37 billion in outstanding VAT in the last fiscal year against the target of Rs 3.73 billion.

The amount of income tax recovered stood at Rs 8.97 billion against the target of Rs 5.70 billion. According to the IRD, the collection and adjustment of unpaid VAT and income tax was also higher than the target.

Chudamani Sharma, director general at the IRD, said that the tax authority’s failure to enforce the law and lack of honesty among businessmen were both responsible for the continued existence of tax defaulters.

“Although we did well in reducing the number of VAT defaulters, it cannot be called a success until we bring down defaults to zero,” he said. According to him, the IRD has accorded priority to the enforcement of laws to eliminate defaults and halve the number of non-filers in the current fiscal year.

There is a growing trend among registered taxpayers of not filing their tax returns. Among the 685,958 registered corporate income tax payers in the last fiscal year, 39.51 percent did not file their tax returns. Likewise, 30.98 percent of the 133,178 firms registered under VAT did not file their tax returns, said the IRD. Sharma said that the percentage of non-filers had grown in recent years as firms had been registered haphazardly in a bid to increase the number of registered taxpayers.

“For example, a potential contractor has to be registered with the tax office in order to place a bid, so the number of registrations is high. But if they don’t get the contract, they forget about filing their tax returns,” he said. “As the performance of tax officers is gauged by the distribution of permanent account numbers (PAN), there is greater focus by tax offices on increasing the number of PAN holders.”

IRD was able to cut the percentage of income tax non-filers from 58.36 percent in fiscal 2010-11 to 39.51 percent in fiscal 2013-14.

However, the percentage of VAT non-filers rose from 21.33 percent to 30.98 percent during the four-year period.

Published: 19-11-2014 09:31

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