30,000 firms under revenue radar over VAT
KATHMANDU, July 29:
Altogether 30,000 business firms found submitting false reports to revenue offices are under investigation, the Inland Revenue Department (IRD) said.
“Inland Revenue Offices (IROs) all over the country started investigating those firms on the basis of mismatches in the transactions that they reported,” Ganesh Pandey, deputy director general of IRD, told Republica.
Importing firms submit value added tax (VAT) for imported goods at the customs points, as per the declared value of the goods.
“Business firms registered for VAT then collect the VAT surcharge from consumers at the point of sale,” Pandey said, adding “Revenue offices found that these firms were not submitting VAT bills as per their transactions.” He further clarified that firms selling products for more than the amount declared at customs should submit VAT for the additional amounts also.
The business firms alleged to have evaded VAT have produced fake bills, according to IRD officials. “While tallying transactions between firms as per their transaction records, the revenue offices have found many business firms to be involved in VAT fraud.”
Revenue offices in the past used to check only the accounts of the firms, but later, when they started to check the bills of purchase as well as sales, they found a huge mismatch between seller and purchaser.
IRD has directed all revenue offices to carry out through investigations into the suspect firms. However, IRD officials have not disclosed how much money is involved in the VAT evasions.
After investigations into such mismatches, which were launched for the first time in 2011, IRD has been closely watching the transactions of all big firms. There was leakage in VAT because of an ineffective revenue tracking system for transactions between VAT-registered firms, it is stated.
“The importing firms would show clearance of stock through sales to fake firms,” according to Rajan Khanal, acting secretary at the Ministry of Finance. Khanal was director general at IRD when the investigations into VAT-related mismatches were first launched.
Big firms in the Valley were found creating fake VAT bills and setting up fake buyer firms. “They used to sell their goods to the fake firms and produce fake VAT bills showing that they sold for less than market value,” Khanal said, adding “But in reality they had sold to others at market value and collected the full VAT surcharges.”
In 2011, IRD investigated 518 large business firms and evaluated the evaded VAT amount at Rs 6.95 billion, which it then compelled them to submit. Since then the revenue offices have been strictly watching the transactions of VAT registered firms.
Firms whose annual transactions exceed Rs 2 million in goods or Rs 1 million in services have to register for VAT. Among the 1.3 million taxpayers, 140,000 are registered for VAT.
Source: Republica
