NATIONAL 2 (Spotlight Weekly)]

Widening The Net

The scheme to expand the revenue base ropes in quite a few new taxpayers

By SANJAYA DHAKAL

Minister Mahat : Encouraged

"The government has not set any target for collection in the VDIS," Finance Minister Dr. Ram Sharan Mahat had told SPOTLIGHT last week. Given his statement, the fact that the Internal Revenue Department (IRD) managed to rope in 2,200 new payers in the tax net, collecting Rs 440 million in revenue during the Voluntary Disclosure of Income Scheme (VDIS), points to the considerable success of the effort. Critics of the scheme say the VDIS target fell short by more than 50 percent, as the authorities had hoped to collect around 1 billion rupees in new revenue.

Revenue worth over Rs 160 million had been collected by Saturday, a day before the deadline for the scheme expired on January 13, authorities said. On Sunday (January 13), the collection rose dramatically. Over Rs 200 million was collected on that day alone. According to the department, concerned government offices and banks remained opened on Saturday, a government holiday, to accept the voluntarily disclosed taxes.

Likewise, the department extended the scheme by one day, accepting tax payment on Monday from residents of Kathmandu valley, where Sunday was a government holiday. Another Rs 80 million was collected on Monday. In total, about 2,200 individuals have disclosed their property worth Rs 4.4 billion that was outside the tax net.

The cash-strapped government had announced the scheme in the current fiscal year's budget last July. It aimed to bring in hitherto non-payers as well as those who have not revealed their real income into the tax net by offering easy entry.

According to the Financial Act 2001, a person with property that is taxable under law and who has not yet paid taxes, can do so by voluntarily disclosing his/her income earned till July 15, 2001 and paying ten percent of the income (as of the price on July 16, 2001) by January 13, 2002. If somebody pays tax in this manner, no government agency shall probe into the sources of his/her income for any purposes and no additional penalty imposed.

Tax experts have termed the scheme as necessary. "In any country with a low rate of tax compliance, the voluntary disclosure of income scheme is a general practice to rope in the hitherto non-taxpayers. It is a sort of tax amnesty to those outside the net," said Dr. Rup Khadka, a tax expert.

To lure payers to take advantage of the scheme, the act states that the documents and reports submitted for the VDIS will be treated with utmost secrecy and any revelations made therein shall not be used against the presenter.

Meanwhile, the scheme did attract a lot of criticism from businessmen. A member of the Upper House and renowned industrialist publicly pointed to its loop-holes saying that on the basis of existing laws, the tax office would not be able to impose its scheme. Dr. Roop Jyoti, addressing a program organized by Federation of Nepalese Chamber of Commerce and Industry (FNCCI) said that there were many alternatives, which could save anybody in case the taxmen raided them. Pointing to one such loop-hole Dr. Jyoti said, "Since there is no law that demands us to keep papers/documents of properties/assets that are 5/6 year old, anybody can escape the net by saying that his/her property/asset is 15/20 years old."

The federation, which is an umbrella body of private business sector of the country, also came down heavily against the scheme. According to FNCCI president Rabi Bhakta Shrestha, the federation is against any move to pressurize businessmen to pay taxes. "It seems the scheme is targeted only at businessmen and industrialists. We have been paying taxes regularly. Perhaps there are a few who have not carried out their responsibilities. But the government's scheme should equally cover the prime minister, ministers, political parties, leaders and bureaucrats. Nobody should get any extra facility. We don't think the government has given much attention to this fact," Shrestha was quoted as saying in Deshantar weekly.

The federation has said the move would further damage the business sector, already reeling under recession. In order to soothe the nerves of businessmen, the Finance Ministry had to come out with a public notice requesting regular tax payers not to be concerned. The ministry even introduced the provision of paying only 25 percent of the tax amount due before the deadline. The remaining 75 percent could be paid before April.

In the final days of the VDIS, the federation had toned down its criticism a lot. In fact, as the deadline approached, the federation officially requested the Finance Ministry to extend the scheme period to help others disclose their incomes. The ministry, too, has responded positively. The authorities have hinted at a brief extension of the scheme after making necessary changes in the legal provisions.

Meanwhile, the IRD has warned tax evaders to disclose their income voluntarily and pay accordingly before the deadline. Otherwise, officials would acquire property report, probe the source of income and even confiscate property to recover the unpaid tax amount, the IRD said.

The department has reportedly prepared list of possible tax defaulters. People with big houses, mobile phone connection, children who study abroad and those who pay more than Rs 24,000 in telephone bills per annum are being monitored.

"As this year's VDIS ends, the danger is if the government launches such a scheme every so often, people may not take it very seriously. In the last five years, this is the second time the government has launched such a scheme. Given this fact, many people still tend to think that they have nothing to lose by not paying taxes," said an expert.

As such, the government's actions in the days to come ó primarily its actions against tax defaulters ó will shape the future of Nepal's tax structure.

BIRENDRA MEMORIAL CUP BEGINS

As per the annual sports calendar of All Nepal Football Association (ANFA), the Birendra Memorial Football Tournament, hitherto known as Birthday Cup, kicked off in Dasarath Stadium on Thursday (January 10). Seventeen teams are taking part in the tournament. Twelve of them include clubs belonging to the Group "A" of the national league.

Two others include Nepal Police Team (Mahendra Police Club) and Royal Nepal Army Team (Tribhuvan Club). The other three teams have come from India ó Darjeeling Club, Sikkim Club and one from Kolkata. The Birthday Cup is the premier national football tournament held annually during the birthday of His late Majesty King Birendra Bir Bikram Shah. In the first five days of the tournament, the two foreign clubs ' Darjeeling and Sikkim ' have been booted out. The army team, too, has been defeated.

The young players of Galaxy Club have shown much promise with their magnificent initial play-offs. The twelve A division clubs include Three Star, New Road Team (NRT), Friends Club, Jawalakhel Youth Club (JYC), Ranipokhari Corner Team (RCT), Boys Union Club, Sankata Boys Sports, Naxal, Kathmandu Club and Galaxy, among others. The tournament is being organized by the Geeta Rana-led ANFA, which is recognized by the government. The other ANFA, led by former national player Ganesh Thapa, is recognized by Asian Football Confederation and FIFA. n