The Biggest Ever Corruption Scam Of TAC

 

Uttam Maharjan

 

 

The corruption perpetrated in the name of tax exemption through the apparent authority of the Tax Assessment Commission (TAC) is the talk of the town these days. In the scam involving billions of rupees, Chudamani Sharma has been held in the custody of the Commission for the Investigation of Abuse of Authority (CIAA) since June 2, 2017. The scam was exposed when the Public Accounts Committee (PAC) of the Legislature-Parliament raised questions about the 54th report of the Office of Auditor’s General regarding huge tax exemptions by the TAC.

The TAC was formed on February 5, 2015 with Lumbadhwaj Mahat as its chairman, Umesh Dhakal as member and Chudamani Sharma as member-secretary. While Sharma has been nabbed, Mahat and Dhakal have been at large. Sharma also collected a lot of brickbats in the Ncell buyout deal.

 

Compromise

The TAC was found to have exempted tax to the tune of billions of rupees. Out of the tax of 30.52 billion rupees, the TAC made a compromise with businessmen to settle the tax at 9.54 billion rupees, thus incurring a loss of over 20 billion rupees to the government.

It would be pertinent to mention that the TAC was formed in the good interests of the people and for economic benefit for the country. The main objective of the TAC was to exempt the tax payable to the state by bankrupt companies or those companies that cannot be found despite several attempts at locating them. Its other objective is to settle tax disputes pending in court for years so that some tax can be recovered for the benefit of the state. But the TAC was found to have exempted the tax of even well-running or prosperous businesses. It may be inferred that the TAC exempted a colossal amount of tax in collusion with businessmen to the detriment of the state.

What is more, the TAC was found to have exempted even the VAT of businessmen. VAT is charged on the sales of goods and services and paid by consumers. It is the duty of the concerned businessmen to deposit the VAT with tax offices. The TAC was also found to have refunded the tax already paid by certain businessmen. Thus, the bona fide intention with which the TAC was formed was completely defeated due to the mala fide intention of the TAC and businessmen.

The above tax exemption was found while checking 1069 applications for tax exemption out of 1726 applications. There was a demand for tax exemption of over 40 billion rupees, out of which the TAC had settled cases involving 30.52 billion rupees.

The CIAA filed a case at the Special Court on July 16, claiming embezzlement to the tune of 10.2 billion rupees. Before this, wife of Chudamani Sharma had lodged a habeas corpus with the Supreme Court on July 11, demanding the release of Sharma by arguing that his detention was illegal. As the Special Court was working on the law suit, the Supreme Court ordered the Special Court to maintain the status quo of the case, indicating that the case should not be moved forward. The Supreme Court clarified that the interim order was necessary as it was imperative to scrutinise the legality of the TAC: whether the TAC is a quasi-judicial body or an administrative unit. The Court has said that the case will be forwarded to a full bench, which will interpret certain provisions of the TAC Act-2076, the CIAA Act and the Prevention of Corruption Act. It has also said that the jurisdiction of the CIAA over the TaC has also to be scrutinised.

With the corruption case exposed, the very functionality of the TAC has been questioned. As per the Income Tax Act, 2058, tax cannot be increased, decreased or exempted by any entity or commission on the strength of any financial act other than Parliament. Viewed thus, the formation of the TAC is illegal per se. As per the Income Tax Act, taxpayers make self-assessment of their tax. If the concerned tax office is not satisfied with the tax assessment, it may re-assess the tax. If a taxpayer, on the other hand, is not satisfied with the tax assessment made by the tax office, appeals can be made with the Director General of the Inland Revenue Department. If the decision made by the Director General is not acceptable to the taxpayer, they can appeal to the Revenue Tribunal and finally to the Supreme Court. Thus, there are three tiers of appeal provided for in the Income Tax Act to safeguard the interests of taxpayers.

Several TACs have been formed in the country although they may not be required. The government pledged not to form any such commission in 2065. At the time, a tripartite agreement was made between the government, Parliament and the Auditor General. Despite this commitment, the TAC was formed in 2071 BS.

The tax exemption scam is the biggest ever in the history of the country. Even the much-touted Sudan scam pales before this scam. Nepal is known as a country of corruption. But corruption on a scale running into billions of rupees has hardly been imagined by the people. On the one hand, the government is concerned about how to mobilise revenue by widening the tax base, while on the other even tax officers have indulged in tax embezzlement. Hence, it has been extremely necessary to cautiously recheck the tax files of other businesses and even individuals so as to circumvent tax embezzlement on the part of not only taxpayers but also tax officers.

 

Draft bill

Now the government is mulling over forming a permanent Tax Settlement Commission to look into tax disputes. But the commission will have no teeth to settle tax. It will, however, submit its recommendations to the Federal Revenue Board, which will make the final decision. The Finance Committee of the Legislature-Parliament has also directed the government to scrap the TSC Act, reasoning that as self-assessment of tax has been in order with the enactment of the Income Tax Act, the TSC is no longer required. The draft of the bill has been sent to the Nepal Law Commission. The government is considering submitting the bill to Parliament soon.     

 

 

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