Don’t okay Ncell’s capital plan: PanelThe Parliamentary Finance Committee on Friday instructed the government not to approve Ncell’s capital increment plan and other business expansion schemes until outstanding tax liabilities related to its ownership transfer is cleared.
The Parliamentary Finance Committee on Friday instructed the government not to approve Ncell’s capital increment plan and other business expansion schemes until outstanding tax liabilities related to its ownership transfer is cleared.
Succumbing to steady pressure from stakeholders, the telecom company had filed tax return and paid Rs9.96 billion—15 out of 25 percent of the capital gains tax (CGT)—on the behalf of its previous owner TeliaSonera on May 8. Now, the government says it has to receive the rest of the amount from TeliaSonera.
Ncell had proposed increasing its capital to Rs155.53 billion to the Department of Industry (DoI). The proposal was forwarded to the Industrial Promotion Board (IPB), which is responsible for approving investment over Rs2 billion.
An IBP meeting on Sunday decided to investigate Ncells’ capital hike plan before taking any decision after finding the company had already hiked its capital to over Rs27 billion from Rs17 billion without taking approval. IPB has formed a probe committee headed by Industry Secretary Surya Silwal.
Friday’s meeting of the Finance Committee instructed the Ministry of Industry and Ministry of Information and Communication to first ensure that the remaining tax liabilities are paid to the government before approving Ncell’s capital hike and other business expansion plans.
The House committee said the tax should be paid in Nepal as the company has been registered here, profit has been made here and capital gain has been received through the share transfer of a Nepal-based company. “Our direction is guided by the fact that the state is entitled to receive the tax as per the law,” said Prakash Jwala, chairman of the committee.
The house committee has also instructed the Ministry of Finance to inform it after recovering the remaining tax. Jwala said the government has received capital gain tax in each transfer of Ncell’s ownership in the past. “This has also established the fact that Nepal is a country where CGT should be paid,” he said.
Meanwhile, the house committee expressed doubt over whether full tax payment was made during previous ownership transfers of Ncell. And, it has directed the government to probe the issue. “There 11 ownership transfers of Ncell and it seems the transaction amount was shown low to pay less tax in the previous transactions,” said Jwala.
In a record deal struck in April, Malaysia’s Axiata bought Reynolds Holding, which held a majority stake in Ncell, from Swedish-Finnish company TeliaSonera at an enterprise value of $1.03 billion (approx Rs103 billion). Reynolds Holding was TeliaSonera’s wholly-owned subsidiary, registered at Saint Kitts and Nevis, a tax haven.
The Malaysian company had also acquired 19.6 percent stake of Visor Group of Kazakhstan to have 80 percent stake in Ncell. But the tax authority initiated the process to tax the transaction only after Teliasonera exited Nepal.
On Friday, officials from Ncell insisted the new owner should not be made liable to pay CGT as it has not made any capital gains. TeleaSonera is the company that made capital gains while selling Ncell to the Malaysian company, but Nepali tax officials say Ncell should have withheld the amount meant for tax payment in Nepal.
Although Axiata had sought prior order on whether the CGT should paid in Nepal before it acquired Ncell, the tax authority didn’t respond to it.
TeliaSonera has claimed the transfer of ownership was done after taking all necessary approval from Nepali authorities.