IRD recalls tax officials from cigarette factories

KATHMANDU, July 20:

Inland Revenue Department (IRD) has called back its officials from cigarette factories from Friday, authorizing the company management to declare input and output figures on their own.

Now onwards, the department will determine taxes on the basis of self-declared figures.

"Self-declaration system has been implemented on a trial at cigarette factories and it is a part of reforms," Ram Mani Dawadi, deputy director general at IRD, said. "The aim is to make the management and factory owners responsible."

There are three cigarette manufacturers in the country -- Surya Nepal, Gorkha Lahari and Perfect Blends (Nepal). Surya Nepal, which operates two plants -- one each in Bara and Tanahun, enjoys 85 percent share in country's cigarette market.

"In this age of liberalization, we wanted to implement the concept of monitoring documents instead of deploying officials physically," Dawadi said, adding that the self-declaration on tax was started back in early 1990s. He said IRD office issues excise duty stickers to the factories and they will stick them on the finished products themselves.

Until Thursday, half a dozen tax officials were deployed at cigarette factories. They would monitor inputs and outputs of the factories. With tax officials from cigarette factories withdrawn, there will be tax officials only in factories producing liquor products now onwards.

"Factories were against the self-declaration provision as, in case of irregularities, they would come clean saying that all the things have been monitored by our officials. Now, they will have to be responsible for the irregularities," he added.

Tax officials deputed by IRD had been saying that it was impossible to keep tabs on all the information of large factories. Officials say IRD will decide whether or not to continue self-declaration provision after studying self-declaration made by the cigarette factories.

Chartered Accountant L D Mahat, who is the chairman of Tax Settlement Commission, said the self-declaration provision is good. "But IRD must enforce strong check and balance measures to control irregularities," he added.

The government collected Rs 7.34 billion excise duty from cigarette and tobacco factories in 2013/14. Cigarette and tobacco contributed 27 percent in total excise duty collection of Rs 27.37 billion in 2013/14.

Statistics of Ministry of Finance shows the country produced 11,130 million sticks of cigarettes in 2008/2009. -

The government introduced self-declaration provision in the tax system by endorsing Income Tax Act in 1990s and other laws like Value Added Tax (VAT) Act, among others. Tax officials say reforms in tax system, including self-declaration provision, has worked wonders and the country now collects 32 percent of total revenue collection from VAT and 25 percent from income tax.

In early 1990s, customs tax was the top contributor to total revenue. It now stands in the third position with contribution of 22 percent.

Source: Republica