Preparation underway to form Tax Settlement Commission

KATHMANDU, Feb 9 : The government is making final preparation to form Tax Settlement Commission (TSC) in order to address problematic tax issues and collect due revenue from taxpayers.

Finance ministry officials privy to the issue told Republica that the terms of reference (ToR) of the powerful commission is in the drafting phase and that it will be tabled in the cabinet for formation of a three-member commission very soon.

The commission will be led by a tax expert.

The commission, which is being formed as per the Tax Settlement Commission Act 1976, will recover outstanding taxes to be assessed and recovered pursuant to the Nepal laws in force in order to maintain the convenience and economic interests of the general public.

Inland Revenue Department (IRD) had forwarded the proposal to form the commission to the Ministry of Finance (MoF) a week ago. IRD Director General Chudamani Sharma said the proposed commission will have the mandate to settle pending tax related cases including those related to businesses and sick industries. "It will clear all pending cases related to revenue collection," he added.

Sharma, however, said the settlement will not cover normal procedure of revenue collection and criminal cases.

The government is yet to recover Rs 40 billion worth of revenue from different tax headings like income tax and Value Added Tax (VAT), among others.

More than half a dozen temporary tax commissions have been formed since the law came into force in 1976. The government had last formed Tax Settlement Commission in 2007.

Along with recovery of outstanding tax dues, the commission will also enhance good governance in tax administration, and assess and settle even sub judice tax related cases.

Country´s private sector has long been demanding that the government form a powerful commission to settle pending tax related cases. Pradeep Jung Pandey, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that the commission can settle tax related issues of more than 12,000 businesspeople and firms.

The commission is also expected to settle several tax related cases created due to legal vacuums and irregularities created by procedural defects, among others. It will settle such cases after studying taxpayers´ economic level and their capacity to pay taxes.

According to IRD officials, around 1,500 cases are awaiting final verdict at Inland Revenue Tribunal. Similarly, IRD is studying another 900 such cases. Over a dozen cases are awaiting verdict at Supreme Court.

“Petitioners can apply to withdraw cases from the tribunal and try them at TSC," Sharma said, adding that the commission might have tenure till the end of the current fiscal year i.e. mid-July.

Though our law provisions formation of a temporary commission, many countries across the world have tax study commissions of permanent nature.

Ministry officials say the proposed commission, however, will not study criminal cases like VAT bill scam worth Rs 2.27 billion.

According to the law, the commission shall consist of three members who have done special study and expertise on tax matters, as specified by the government, and out of whom, one person shall be designated as the chairperson.

Meanwhile, Rup Khadka, chairman of High-level Tax System Review Commission, said they will also make recommendations to the government on pending tax related issues.

The government has formed the high-level commission to study country´s tax system, analyze the current tax policy and tax structure, and submit recommendations to develop an appropriate and pragmatic tax system. The commission will submit its report by Mid-April.

Source: myRepublica