No movie theatre in the metropolis is paying taxes on ticket sales to the municipal authority, resulting in revenue loss amounting to millions, a senior revenue official at the Kathmandu Metropolitan City said.

There are 11 cinema halls and multiplexes in the KMC and they are required to pay two percent of the total ticket sales amount for foreign language films as entertainment tax to the metropolis. “The movie theatres have not even presented details of ticket sales to us, let alone pay taxes due on them,” said Dhurba Kafle, chief of the KMC’s Revenue Division. “Some of them have stopped paying the tax for seven years while most others have never paid it.”

The Local Self-governance Act-1999 entitles local bodies to levy tax on entertainment activities organised within its area. Article 141 states, “The municipality may levy entertainment tax, as prescribed, on the means of entertainment such as cinema halls, video-halls, cultural-show halls permitted within the municipal area.” The tax spares Nepali language films but since 80 percent of the movies on Nepali theatres are from Bollywood, the metropolis is missing out millions in overdue taxes.

According to the KMC’s estimate, a movie theatre in Kathmandu has an average of 60 seats and each movie is screened two to three times a day. If the theatre is operational for only 20 days in a month, it means it sells somewhere around 3,000 tickets at varied prices. “With two percent rate on entertainment tax, we should be able to collect at least Rs2.5 million each year from all the movie theatres in the metropolis,” Kafle said.

Among the movie theatres in Kathmandu, QFX Kumari Cinema of Kamalpokhari and QFX Jai Nepal of Hattisar had been paying entertainment tax to the KMC until fiscal year 2009/10. While other movie theatres—Asta Narayan Pictures of Balaju, Ganga Hall of Balaju, Bishwajyoti Cinema Hall of Jamal, Gopi Krishna Movie Hall of Chabahil, QFX Central of Sundhara, Cine de Chef of Sundhara, Big Movies of Kamalpokhari, Q’s Cinema of Durbarmarg and FCUBE Cinemas of Chabahil—have never paid entertainment tax. Although they are regularly paying other taxes like business taxes and land taxes, total overdue entertainment taxes from all these till date amount to hundreds of millions.

Nakim Uddin, one of the shareholders of QFX Cinemas, blamed the KMC for not collecting entertainment tax. “Earlier, municipalities across the country levied local development

tax on movie theatres

which we duly paid. But the tax was removed some five years ago,” he said. “If municipalities have introduced new taxes after that, they should inform us and collect them.”

It is not that the theatres do not make money. A few years ago, Gopi Krishna Movies had acquired rights to show Bollywood flick Dhoom 3 in Nepal for Rs32 million. It went on to become the highest grossing movie in Nepali box office breaking the Rs60 million mark for the first time. “Entertainment tax is not levied on the operator’s profit but on ticket sales so the operator can add the amount on ticket prices. But despite regular correspondence with them, they are not paying up,” Kafle said.

The Local Self-governance Act authorises the KMC to punish tax defaulters. Article 165 empowers the municipality to stop providing services like garbage collection and even to write to the concerned body to stop the transfer of ownership of the property of such person and to freeze their trade. The properties may even be auctioned to recover the tax amount. The KMC did resort to stopping garbage collection from these movie theatres last year but had to retreat as the operators remained undaunted.

Entertainment tax has always been a headache for the KMC. Apart from movie theatres, it has also failed to collect entertainment tax from star hotels and party palaces. According to Kafle, the KMC has only collected around Rs7,000 in entertainment tax so far this fiscal year and that too from small-scale trade fairs organised around town.

Meanwhile, the KMC said that the movie theatres have also been cheating on house rent tax. “Most of these are found to have rented out spaces within their establishment for food and drinks cafes,” Kafle said. “For this, they are liable to pay two percent of rent income as house rent tax,” he said.