Authorities concerned are still not sure whether the government should levy capital gain tax on the proposed acquisition of Ncell by Malaysia-based Axiata.

They have also expressed confusion over whether the government could intervene in the pricing of the shares.

Different prices have been maintained for the shares owned by Ncell’s foreign shareholders and Nepali joint venture partner. The authorities, however, maintained the share price a private company depends on the understanding between seller and buyer.

The government agencies have given vague response to the six issues raised by the Parliamentary Development Committee, citing lack of clarity in the law.

The house committee on January 26 had sought response from the Inland Revenue Department (IRD), Department Industry, Ministry of Information and Communication, Office of Company Registrar and Nepal Telecommunications Authority (NTA) over various issues.

IRD has said it is holding discussions with domestic and international tax experts, accounting experts and experts on international laws on whether Nepal could impose capital gain tax on the proposed off-shore transaction of Ncell’s 80 percent stake.

In the biggest acquisition deal in Nepal’s history, Axiata has agreed to buy Ncell’s 80 percent stake for $1.4 billion from Swedish telecom firm TeliaSonera (60.4 percent) and Kazakhstan’s Visor Group (19.6 percent).

Seeking a prior order from IRD on Dec 22, 2015, Axiata had asked IRD whether Nepal would levy any tax on the transaction to be done abroad. “IRD has been studying the matter and no decision has been taken yet,” an IRD letter to the house committee reads.

On the different prices maintained for the shares held by foreign and Nepali investors, IRD has said the share prices are determined by the market. “Both domestic and foreign investors can buy the shares held by a foreign investor. But in the case of 20 percent shares held by domestic investors, only Nepalis can acquire those shares as per the existing law. So the share prices can be different.”

The price for the 80 percent stake held by the foreign firms has been maintained $1.4 billion, while the 20 percent stake held by Nepalis has been valued at $48 million. Lawmakers had suspected that the price for the 80 percent foreign stake was maintained higher assuming that no tax would be levied on that transaction, and the price for the domestically-held shares—on which the tax is applicable—was maintained lower to evade tax.

IRD has said telecom sector regulator Nepal Telecommunications Authority could decide on whether the government could intervene in the share pricing. “A tax officer can impose additional tax only if there is evidence that the share price has been shown lower in order to pay lower tax,” the IRD letter states.

Department of Industry (DoI) and Office of Company Registrar (OCR) have argued share prices of a private limited company depend on the deal between the seller and buyer. “But there is no clear legal provision on whether the government can intervene in the share pricing,” DoI said.

It also expressed ignorance about the transaction of Ncell shares held by foreigners and said it was not sure about the different share prices maintained. DoI has in principal approved the sale of locally-held 20 percent stake to Sunivera Capital Ventures by Neeraj Govinda Shrestha.

OCR said once the seller and buyer fix the share price of a private limited company and the respective boards approve the pricing, the transaction gets legitimacy.

NTA has said ownership transfer of any telecommunications company should be carried out only after taking its approval.

Meanwhile, lawmakers on Monday expressed concern over government agencies’ failure to take a decision over such a controversial issue.

Lawmaker Vaijanath Chaudhary said government bodies’ failure to take a decision could affect foreign direct investment. “The government should come up with a clear modality on how to incorporate foreign investors in joint venture companies,” he said.

Lawmaker Sita Giri said the lack of uniformity in government authorities’ explanations has raised questions over the effectiveness of the government policy.