PAC issues Ncell directive to MoF

- Post Report, Kathmandu
In the biggest corporate buyout deal in Nepal, Telia, a Swedish telecom giant, sold its stakes in Ncell to Malaysian company Axiata, for $1.03 billion in 2015

Apr 28, 2017-The Public Accounts Committee (PAC) of Legislature Parliament has directed the Ministry of Finance to notify it about progress made in determining capital gains tax regarding the Ncell buyout deal within five days. The directive has come after the Ministry failed to clarify the government’s position and determine tax, based on the house committee’s previous directive. The PAC had asked the government to determine tax by mid-April. 

“The Ministry have been told to send us details by Monday”, said PAC Secretary Surendra Aryal, adding that the committee have yet to receive any notification from the Ministry regarding the process. “We will initiate further discussion based on the notification from the ministry.” The deadline set by PAC expired on April 15.

Following PACs directive asking the government to determine tax on the Ncell deal, the Large Taxpayers Office (LTO) under the Inland Revenue Department (IRD) had formed a three-member expert team to advise it on Ncell’s ownership transfer case.  Likewise, in a recent PAC meeting, IRD Director General Chudamani Sharma had sought an additional one month for investigations. However, the house committee did not officially grant a deadline extension. 

In the biggest corporate buyout deal in Nepal, Telia, a Swedish telecom giant, 

sold its stakes in Ncell to Malaysian company Axiata, for $1.03 billion in 2015. The government had clearly stated that 25 percent of the profit made from the sale of Ncell had to be deposited as capital gains tax.

Likewise, highlighting the taxman’s incompetency in collecting tax amount due from the sale of Ncell, the Office of the Auditor General (OAG) has been pressing the government to clear its position on the case at the earliest. The autonomous body that conducts financial audit of government agencies has singled out the Finance Ministry for not collecting the tax amount on time and has booked arrears of Rs32 billion in the name of the ministry.

Ever since the deal took place, the government has been saying tax would be 

levied on the transaction, but it has not mentioned the amount that needs to be collected. Following pressure from the government, Ncell has so far deposited Rs 9.97 billion as 15 percent withholding tax, or tax-deductible at source for the capital gains. The payment of this tax amount means the seller earned Rs66.46 billion by disposing its ownership in the telecom company. This tax amount was calculated by Ncell on its own.

Likewise, Prime Minister Pushpa Kamal Dahal appearing before PAC recently 

had hinted that the government would not hesitate to recover due capital gains tax on sale of Ncell, the largest private sector telecom company, from Ncell itself, if the seller refuses to fulfil its tax obligation.

In principle, capital gains tax should be paid by sellers of assets who generate profit from the deal. Since Telia had sold its stake in Ncell to Axiata, the European company should shoulder the tax burden. But the company has already exited Nepal. Ncell, on the other hand, has been saying it was not obliged to pay the tax on behalf of Telia because it did not benefit from the deal.

Published: 28-04-2017 08:55

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