No tax evader will be spared
MAY 22 -
Rajan Khanal is director general of the Inland Revenue Department (IRD) that is currently carrying out investigation on Value Added Tax (VAT) evasion. Of the 532 companies under its scanner, the department recently completed probe on companies. Khanal talked to the Kathmandu Post about the probe and its impact.
Excerpts:
It has almost been six months since IRD initiated the much talked about investigation. What kind of impact the probe has made on tax compliance?
The level of tax compliance has gone up remarkably after the initiation of the probe. The department was short of the target by Rs 700 million in December. But now we have a surplus of Rs 530 million as of mid-May. We’ve updated names of non-filers (those not paying taxes) in our website. Now, people are doing business only after making sure that the other party is not a non-filer. I think this will promote fair business practice.
It took six months for the department to complete probe on 31 companies. Why did it take so long?
Proving someone guilty is not an easy task. One should remember that a businessman has business dealings with many parties in different places. Therefore, collecting information obviously takes time. It took only six months as we’ve a good IT system in IRD.
Some say that the investigation has fuelled capital flight, hitting hard the economy that is already facing a slowdown.
In my opinion, we initiated the probe at the right time. If the probe was carried out two-three years later, businessmen would have found it much difficult to pay fines, as the penalty amount would have been bigger. Also, the use of fake VAT bills would have increased on a big scale.
How severe was VAT evasion in the country?
Our investigation shows that the use of fake VAT bills increased in last three years. Political instability, weak governance and more focus on trade contributed to it. When the state becomes weak, it’s natural to see tax evasion. What has surprised us is even new generation entrepreneurs are found involved in VAT evasion.
The probe has also questioned the role of auditors, as some of them were found involved in this malpractice. What is IRD doing against them?
Anyone who is found involved in tax evasion should be brought to book. We’ve also asked the Institute of Chartered Accountants of Nepal (ICAN) to take against these auditors.
There is a fear that the government might give amnesty to VAT evaders through the new budget?
I don’t see any possibility of amnesty to VAT evaders. We’ve already completed probe on 52 companies and forwarded to revenue offices for income tax assessment. The IRD has developed software that detects any cases of VAT evasion. Now, it has become an integral part of regular audit of the department.
The IRD probe also found many cases of misuse of VAT refund facility, in which a huge amount of money was siphoned off from the government treasury using counterfeit bills. Don’t you think it is high time to review the VAT regime?
Yes, it has certainly made us think about it. But I also think that we can control this illicit practice if there is a better coordination between three agencies—IRD, Department of Revenue Investigation and Department of Customs. If we’ve better coordination, tax evaders can easily be tracked down by one or the other institution.
Source: Kantipur
Rajan Khanal is director general of the Inland Revenue Department (IRD) that is currently carrying out investigation on Value Added Tax (VAT) evasion. Of the 532 companies under its scanner, the department recently completed probe on companies. Khanal talked to the Kathmandu Post about the probe and its impact.
Excerpts:
It has almost been six months since IRD initiated the much talked about investigation. What kind of impact the probe has made on tax compliance?
The level of tax compliance has gone up remarkably after the initiation of the probe. The department was short of the target by Rs 700 million in December. But now we have a surplus of Rs 530 million as of mid-May. We’ve updated names of non-filers (those not paying taxes) in our website. Now, people are doing business only after making sure that the other party is not a non-filer. I think this will promote fair business practice.
It took six months for the department to complete probe on 31 companies. Why did it take so long?
Proving someone guilty is not an easy task. One should remember that a businessman has business dealings with many parties in different places. Therefore, collecting information obviously takes time. It took only six months as we’ve a good IT system in IRD.
Some say that the investigation has fuelled capital flight, hitting hard the economy that is already facing a slowdown.
In my opinion, we initiated the probe at the right time. If the probe was carried out two-three years later, businessmen would have found it much difficult to pay fines, as the penalty amount would have been bigger. Also, the use of fake VAT bills would have increased on a big scale.
How severe was VAT evasion in the country?
Our investigation shows that the use of fake VAT bills increased in last three years. Political instability, weak governance and more focus on trade contributed to it. When the state becomes weak, it’s natural to see tax evasion. What has surprised us is even new generation entrepreneurs are found involved in VAT evasion.
The probe has also questioned the role of auditors, as some of them were found involved in this malpractice. What is IRD doing against them?
Anyone who is found involved in tax evasion should be brought to book. We’ve also asked the Institute of Chartered Accountants of Nepal (ICAN) to take against these auditors.
There is a fear that the government might give amnesty to VAT evaders through the new budget?
I don’t see any possibility of amnesty to VAT evaders. We’ve already completed probe on 52 companies and forwarded to revenue offices for income tax assessment. The IRD has developed software that detects any cases of VAT evasion. Now, it has become an integral part of regular audit of the department.
The IRD probe also found many cases of misuse of VAT refund facility, in which a huge amount of money was siphoned off from the government treasury using counterfeit bills. Don’t you think it is high time to review the VAT regime?
Yes, it has certainly made us think about it. But I also think that we can control this illicit practice if there is a better coordination between three agencies—IRD, Department of Revenue Investigation and Department of Customs. If we’ve better coordination, tax evaders can easily be tracked down by one or the other institution.
Source: Kantipur
