House panel tells govt to amend ITSC Act

  • ITSC officials had been given carte blanche to grant tax reductions to large companies
- Post Report, Kathmandu

Jun 16, 2017-

The parliamentary Finance Committee on Thursday directed the government to amend the Income Tax Settlement Commission (ITSC) Act 1976 following revelations of illegal tax reductions granted to various companies by since suspended director general of the Inland Revenue Department (IRD) Chudamani Sharma.

The House committee has forbidden the government from forming a new Tax Settlement Commission until the act is amended. 

The panel said that ITSC officials had been given carte blanche to grant tax reductions to large companies. Lawmakers said that such full authority had led to huge revenue losses for the government. 

Tax issues related to Ncell and Sharma’s suspension have sparked a public outcry. Large-scale graft has been suspected after illegal tax reductions granted to various business enterprises were exposed. 

Sharma, who was also a member of the ITSC, has been arrested by the Commission for the Investigation of Abuse of Authority (CIAA).

Based on information provided by Sharma during his interrogation, the anti-graft body has collected around 1,000 files from the IRD and has examined 120 of them, according to CIAA sources. The investigation has revealed irregularities totalling more than Rs800 million.

The government issued the Income Tax Act 2002 as per the ITSC Act in a bid to simplify the process of filing returns. This allows taxpayers to declare their income tax in advance. The returns can be approved or rejected at the discretion of ITSC officials.

Prakash Jwala, chairman of the parliamentary Finance Committee, said the excessive authority delegated to commission officials had mainly benefitted large taxpayers. “The rampant tax reductions granted to large reductions have led to revenue losses,” he said. 

Revenue Secretary Rajan Khanal said that the Finance Ministry could not intervene or question the commission’s decision. “That’s why there is a need for an autonomous body to oversee the ITSC,” Khanal told lawmakers. 

Lawmaker Udaya Shamsher Rana criticized the working procedure of the ITSC. “As the commission has been checking business firms based on random sampling, the sample size should be increased significantly to ensure effectiveness of tax recovery measures,” he said. 

Currently, the CIAA is investigating tax reductions granted by the ITSC which was formed in 2014. The commission led by Lumba Dhwaj Mahat and consisting of Sharma and Umesh Dhakal as members has granted tax reductions totalling Rs21 billion. 

Lawmakers sought the House panel’s intervention to review the case files. Lawmaker Lyarkyal Lama said files related to suspicious cases should be brought under the jurisdiction of the parliamentary committee. 

“As tax recovery is one of the main pillars of the government’s economic policy, those involved in the scam should be scrutinised thoroughly,” he said. 

Former finance minister Ram Sharan Mahat said the government had established the ITSC with the aim of providing relief to firms facing financial problems. “Apart from resolving pending tax cases, the commission deals with firms that have been shut down or are facing financial problems and sick factories,” Mahat said. 

According to him, the commission should speed up the settlement of pending cases through negotiations with taxpayers. “Officials found involved in illegal practices should be punished as per the law,” he said. 

Published: 16-06-2017 08:30

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