Many firms vanish without paying taxes, says IROA large number of enterprises in Rupandehi district have been evading taxes by not filing their tax returns, the Inland Revenue Office (IRO) said. According to IRO officials, many of these firms go out of contact of the tax authorities after carrying out their businesses.
A large number of enterprises in Rupandehi district have been evading taxes by not filing their tax returns, the Inland Revenue Office (IRO) said. According to IRO officials, many of these firms go out of contact of the tax authorities after carrying out their businesses.
Shiva Shakti Galla Bhandar is one of the firms whose whereabouts is unknown. It obtained a permanent account number (PAN) from the IRO last year, stating that it operated out of offices at Gallamandi. The firm had been instructed to pay 40 percent of its income tax by mid-January and the rest by mid-April, but it has not even submitted its transaction details till date.
Shiva Shakti has also received import and export licences for various products. According to the customs office, the firm imported potatoes and onions worth Rs537.5 million. Based on this volume of transaction, the firm owes Rs1.5 million in income tax.
After Shiva Shakti failed to file its tax details within the deadline, tax officials tried to contact the enterprise’s proprietor on the telephone number provided to the IRO. However, IRO officials could neither contact the owner on the telephone nor find any office of the enterprise at the specified location.
IRO officials also tried to contact Shiva Shakti’s proprietor Manif Kurmi through the postal service. Kurmi’s citizenship records show him as a permanent resident of Belawa-8 in Parsa district. However, officials could not contact him at this address either.
Maharaj Koirala, chief of the IRO, Bhairahawa, said they made a multiple attempts to contact Kurmi. “Failing to contact him, we have asked Bhairahawa Customs not to permit Shiva Shakti to import goods until it submits its tax details,” he said.
Similarly, records show that Shahi Food Store imported vegetables worth Rs107.3 million, Radhika Vegetables Store imported agro products valued at Rs163.7 million, New Lucky Food Store imported food items worth Rs42.2 million and Tahasip Traders imported products worth Rs785,000. However, none of these enterprises is in contact with the IRO.
Many traders started evading taxes after the government scrapped the provision of clearing taxes in advance, officials said. Koirala said similar problems were being seen in other locations too.
“While investigating the firms’ proprietors, it has been observed that either they reside in India most of the time or the firms have been registered by traders in the name of poor and helpless people who do not have any fixed property of their own,” he said.
Unscrupulous traders have been using poor citizenship holders as dummy owners to run their businesses. When tax authorities come to ask for tax payment, they encounter these dummy owners. According to Koirala, they cannot take action against such taxpayers as they do not have any fixed assets.
As per Income Tax Act 2002, firms registered with PAN can operate their businesses for one year. Taxpayers who have to pay income tax amounting to more than Rs5,000 annually have to pay 40 percent of the tax by mid-January, 30 percent by mid-April and the rest by the end of the fiscal year.
As per government rules, these firms have to renew their licences every year in order to continue their businesses. However, the owners either establish a new company or remain out of contact at the time of renewal. The proprietors of these firms allegedly register their firms in the name of poor people or even use Indian citizens holding Nepali citizenships.
Meanwhile, many Indian citizens have also been allegedly evading taxes. As per the Nepal-India bilateral agreement, Indian citizens can operate businesses based on a letter issued by the Indian Embassy. If these Indian citizens flee without paying taxes, the Indian authorities are supposed to recover the outstanding taxes from them if they are hiding in India. Despite the provision, IRO officials have not written to the Indian Embassy.
IRO records show that 40,740 taxpayers in the district have not cleared their taxes totalling Rs351.2 million. Among the defaulters, 29 percent are registered under income tax and 19 percent are registered under VAT. They owe a combined Rs73.7 million in income tax and Rs277.5 million in VAT, according to the IRO. The IRO said a total of 518 firms registered in the district had not submitted their tax returns.