OAG concerned about unpaid VAT worth Rs166mThe Office of the Auditor General (OAG) has expressed concern over the value added tax (VAT) amounting to more than Rs166 million that stockbrokers owe the government.
The Office of the Auditor General (OAG) has expressed concern over the value added tax (VAT) amounting to more than Rs166 million that stockbrokers owe the government.
The 55th Annual Report released by the OAG has asked the government to act to recover the outstanding tax debts for the last four fiscal years. According to the OAG report, the government has yet to collect VAT on the commissions earned by 25 brokerage companies. There are 50 stockbrokers operating in the country.
Stockbrokers charge 0.35-0.6 percent as commission from investors. The government levies 13 percent VAT on the commission. However, the Finance Ministry has not come up with clear and concise instructions to stockbrokers stating that it has yet to finalise the modality.
Last year, the Inland Revenue Office (IRO) wrote to three brokerage firms to clear their outstanding VAT for the last four years along with the penalty for late payment. The three firms, Sundhara Securities, Sewa Securities and Investment Management, were notified by the taxman last July to clear their tax debts from fiscal 2013-14.
Among the three, Sundhara Securities owes the taxman Rs6.3 million in VAT, Sewa Securities Rs11 million and Investment Management Rs11.7 million.
The IRO has not taken any further steps citing that the audit assessment reports of the rest of the brokerage firms are pending.
The IRO has not made a real effort to collect VAT after stockbrokers halted share transactions for two days in protest against its move to tax them.
“We have no problems with paying VAT on our future business. Our only argument is that the government should waive VAT for the last four years because we have not charged VAT on the brokerage fee for lack of clear provisions in the VAT Act which was revised four years ago,” said Santosh Mainali, general secretary of the Stock Brokers Association of Nepal.
According to him, the VAT amount appears as dues in the OAG’s report almost every year due to lack of clarity in the law.
The OAG report has also pointed to a shortfall in the collection of capital gains tax worth Rs5.74 billion on gains from the sale of shares in the fiscal years 2015-16 and 2016-17.
This has been blamed mainly on the assessment of shares of listed companies based on the prevailing market price rather than the actual price that investors paid while buying stocks. The tax dues include Rs779.5 million on the sale of bonus and right shares and Rs287 million on the sale of promoter shares in the two fiscal years.
The OAG has also expressed concern over the delay in the submission of financial reports by listed companies. The report has blamed the lax attitude of the the regulatory bodies including Nepal Rastra Bank, Office of the Company Registrar, Insurance Board and Securities Board of Nepal for the delay.