VAT investigations bring more large tax payers into revenue net

KATHMANDU, Aug 17, 2012

The number of large taxpayers has increased by a whopping 40 percent over the last one year despite slowing economic activities in the country as the government stepped up revenue investigations discouraging manipulation of transactions by business firms through fake VAT billing.

During the fiscal year 2011/12, the government stepped up investigations into fake VAT billing rackets including 518 business organizations that were found to have evaded more than four billion rupees.

Large Tax Payers´ Office (LTO) stated that the number of large taxpayers increased to 722 by the end of the fiscal year 2011/12, up from 522 a year earlier. Of the total large taxpayers, 94 are from banking, 124 from non-agriculture, 29 from multinational companies, 106 from Public Enterprises (PEs), 262 from trading and 107 from agriculture sectors.

A senior office bearer of the Federation of Nepalese Chambers of Commerce and Industry said the number of large taxpayers has shot up significantly, especially those from trading business firms, as the government stepped up investigations on tax evasion following the revelation of 518 cases of fake VAT last year.

According to Madhu Kumar Marasini, deputy director general of Inland Revenue Department (IRD), 495 new cases of revenue evasion through fake VAT billing are under investigation besides 518 old cases.

“More and more firms are showing genuine VAT bills to maintain transparency in their business. It is a positive impact of ongoing investigation into fake VAT billing practices,” he said.

He also said strengthening US dollar vis-à-vis Nepali rupees as well as increasing volume of imports also pushed up the turnover of business firms over the period.

“The number of large taxpayers has shot up significantly along with their increasing contribution to total tax revenue,” said Ananda Dhakal, chief of LTO, at an interaction with large taxpayers on Thursday.

Out of the total tax revenue, contribution of large taxpayers increased to 52 percent during the fiscal year 2011/12 compared to 49 percent recorded the previous year. The government collected Rs 49.40 billion from large taxpayers during the year, up by 23 percent recorded earlier year.

Out of the total revenue collected from large taxpayers, 5 percent was contributed by agro-based, 47 percent by multinationals, 28.8 percent by banks and financial institutions, 4.1 percent by non-agriculture sector, 6.7 percent by trading and 7.2 percent by PEs.

Dhakal said a total Rs 19.61 billion was collected from the top ten tax payers, Rs 61.84 billion from top hundred taxpayers during the fiscal year 2011/12.
Business enterprises having an annual turnover of over Rs 250 million are designated as large tax payers.

Tax officials said business firms involved in the trading of basic essential commodities such as foods, clothing, petroleum products as well as dealers of construction materials, electronic goods are emerging as large taxpayers.

 

Source: Republica

Develop detail digital profile of all taxpayers: MoF instructs IRD

KATHMANDU, Aug 2, 2012

Ministry of Finance (MoF) has instructed Inland Revenue Department (IRD) to develop digital profile of all taxpayers, incorporating their personal, professional and income details, and also carry out survey on rental tax in a bid to generate basic information for tightening knots against revenue evaders.

Under the digital profile, the Ministry has instructed the IRD to expedite its campaign of permanent account number (PAN), whose registration has already made mandatory for all income earners, irrespective of whether or not they need to pay tax.

Likewise, the Ministry has asked the department to mobilize its offices and taxpayers´ service centers to survey out presence of houses and other buildings in their areas, identify whether those are residential, semi-residential and commercial buildings, and whether owners have registered with the tax office and paying rental tax.

“Unless we have clear digital profile and survey we will not have basic details needed to expedite our vigilance and check revenue evasion,” said Finance Secretary Krishna Hari Baskota.

He informed Republica that the Ministry has already instructed the revenue administrators to incorporate the programs in their respective annual plan and devise strategies to implement them. The MoF has suggested them to update existing guidelines on PAN and rental tax if required to generate these basic information.

Officials said development of detailed digital profile of taxpayers was crucial to identify groups vulnerable to tax compliance. Similarly, rental tax is regarded as one of the least complied component.

“Going by our international commitments, we cannot rely on raising tax rates, but will need to widen tax base if we are to continue reaping growth in revenue collections,” said Baskota. “Hence, these steps are crucial for it will lead to widening of tax net.”

Addressing the senior revenue officials at a function on Wednesday, Baskota expressed concern over low revenue-GDP (gross domestic product) ratio which presently stands at 15.5 percent.

“We must raise it to 20 percent over the next few years if we are to maintain our capacity to smoothly execute service delivery and development priorities,” said he laying emphasis on the need to step up reforms and enhance tax enforcement.

Newly appointed acting Chief Secretary Lila Mani Paudyal expressed satisfaction over the latest rise in revenue collections. But he expressed concern over under invoicing that runs deep in import trade, local commodity trade and property transactions, among others.

“Under invoicing has always remained as one big challenge to the revenue administration. It must work collectively and devise ways to tackle it efficiently,” he stated.

At the program, Paudyal handed over award to Inland Revenue Office (IRO), Lalitpur, for delivering the best output among all IROs. IRO Biratnagar and Bharatpur too were felicitated for being second and third best. Likewise, Taxpayers´ Service Center (TSC) at Tripureswor won the outstanding performance award among all TSCs.

Source: Republica