KATHMANDU, Nov 20:
Of the total 518 cases related to fake VAT receipt scam that the revenue administration scooped down on, Inland Revenue Offices have so far concluded investigations into 405 firms and slapped taxes and fines to the tune of Rs 3.58 billion against them.
Of the 405 firms whose investigations were concluded, 189 firms have approached the IRD for the administrative review, expressing grievances over tax assessments done by the investigation officers.
Their request for the review goes in line with the existing tax laws. “As the law seeks the firms to pledge collateral worth 33 percent of the total tax and fines slapped against them for the review, this has enabled the department to collect Rs 712.5 million from them,” said a source at Inland Revenue Department.
Nineteen other firms that previously sought administrative review and failed to get decision in their favor have knocked at the doors of the Revenue Tribunal, challenging the IRD decision.
So far, only seven firms found involved in the scam have settled the taxes and fines slapped against them. “Effectively, we have so far recovered evaded taxes and fine of Rs 83.5 million only,” said the source.
As for the remaining taxes and fines, those will be recovered only after the tribunal issues its verdict. Given that the tribunal has huge backlog of cases and has no mechanism to prioritize the cases, officials said they might have to wait as long as two years to recover the evaded taxes and fines.
Though the Ministry of Finance (MoF) had rushed the investigating officers to conclude the investigations by mid-November, officials said they could not do so due to complexity of the cases involved.
The investigations concluded so far has established that creation of fake VAT receipts by 405 firms inflicted loss of around Rs 1 billion in VAT revenue, over Rs 1 billion in income tax and Rs 60 million in excise revenue.
“Hence, they have been slapped Rs 1.89 billion in VAT and fine, Rs 1.56 billion as income tax and fine and Rs 121 million in excise duty and fine,” said the source.
IRD´s crackdown against the fake VAT receipt scam in December 2010 had revealed widespread use of fake VAT receipt and had estimated the scam of running into Rs 10 billion (over $135 million).
The 518 firms that IRD traced in the scam include even businesses belonging to top corporate houses of the country. These firms had either bought VAT receipts of smaller firms or counterfeited VAT receipts to create fake transactions, thereby inflating costs and reducing their tax liability.
Worse still, seven firms acting on the basis of the fake VAT receipts and customs documents even claimed VAT refund of Rs 116.06 million without contributing a penny to the national treasury.
Officials said they anticipate the IROs to conclude investigations against remaining 113 firms soon. As 96 of the remaining 113 firms being investigated belong to the Large Taxpayers´ Office, a unit of IRD that deals with top taxpaying firms of the country, IRD anticipates the final revenue evasion figure to inflate sharply.
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