We will stick to ToR given to us while settling cases

The government last month formed Tax Settlement Commission, under the leadership of Chartered Accountant LD Mahat, to settle pending tax cases worth around Rs 40 billion. The commission has already set up its office on the premises of Inland Revenue Department at Lazimpat and started receiving applications. The commission is mandated to settle tax related cases by bringing them from various courts and other authorities where taxpayers have filed appeals.

Rudra Pangeni of Republica talked with Mahat to know the commission will settle pending tax cases. Excerpts:

What will be the tax settlement process?

We will look into cases filed by taxpayers. As per the Terms of Reference (ToR) given to us, we will look into tax related cases filed for settlement until fiscal year 2012/13. Taxpayers have to first apply at the commission. If we feel the cases are genuine and fall under our jurisdiction, we will give permission to withdraw the cases from courts, where they are being tried, and bring essential documents from the concerned tax offices. We will settle the cases after negotiating with the taxpayers.

Tax-related cases are piling up for the past many years. What do you think are the reasons behind this?

There are mainly two factors. Taxpayers are not transparent enough to declare their income and pay tax to the government accordingly. Similarly, tax authorities make assessments of estimated income filed by taxpayers and levy additional revenue for income which are not declared by taxpayers. Sometimes people in the authorities levy excessive tax as well as fine on such undeclared income. In such case, taxpayers approach the concerned agency for settlement.

Who is responsible for this -- non-transparent taxpayers or tough taxmen?

Right now, we cannot say who is right and who is not. Both of them might be responsible. Only some of multinational companies, banking and insurance sectors, which are strictly regulated, and listed companies pay taxes duly. Others tend to find loopholes in taxation system. On the other hand, officials are into subjective interpretation of tax laws. Highhandedness of tax officials, while assessing taxes, has become a problem. It is one of the reasons behind growing tax-related disputes in recent years. It is difficult to say in numbers, but there are many instances.

Do you agree that existing laws provide grounds for tax officials to assess taxes on their discretion?

Laws are clear. But in some cases interpretation may vary. Accounting has to be done as per Nepal Accounting Standards which is in line with the international accounting standard and international financial reporting standard. However, people who administer taxes lack knowledge and skills. Though there are some knowledgeable tax officials, there are many others who care not skilled enough to handle taxes properly.

Members of Public Accounts Committee (PAC) recently expressed doubts on the commission's works, saying that its decisions will be politically influenced. What is your take on this?

I don't think we will be influenced by any professional. With 21 years of professional experience, I can handle tax-related issue in a professional manner. Some may try to influence us, but we will work as per the TOR given to us by respecting the law of the land and the policy which we have drafted for effective functioning of the commission. We will not deviate from the policy.

As per our policy, we will not compromise on main tax amount. In case of interest on penalty and fees, we can consider depending on taxpayers' status and condition. We also have guidelines for negotiations for settling the cases in an objective manner. We will consider taxpayers' condition. We may consider on interest on penalty if taxpayers are in loss. But if their business is doing well, we will not provide them any concession. We will see taxpayer's financial statement of subsequent years and also seek tax officers' views before taking final decisions. If tax is levied on taxpayers on imaginary tax assessment made by tax officials, we will consider applications filed by taxpayers and settle the cases accordingly.

Can you tell us why the commission's decisions cannot be tried in courts?

People have started criticizing the commission even before it has started its work. If our decisions are questioned, we may not have the courage to take any decision. The government's objective of recovering taxes won't be achieved, if our decisions are questioned in this way.

Many taxpayers say the commission has been formed to waive off taxes? What do you say?

Yes, we have found misconception among taxpayers regarding the commission. Some say that interest on penalty levied by authorities will be waived off, other say even the tax amount will be reduced. I would like to assure taxpayers that we will not make any compromise while settling pending cases. I have clearly told taxpayers that the commission has been formed to fast track settlement of tax-related cases.

Do you have anything to share with the taxpayers?

I request taxpayers, who have cases pending in courts, to file an application at the commission. I would like to assure all that the commission will take an impartial decision. We are here for quick settlement of cases. But we won't make any compromise on tax amount. So far, we have received around 100 applications. I request taxpayers not to wait for the deadline, mid-July, to file their cases.