Some major cases related to fake Value Added Tax receipts and foreign currency misuse prompted the Department of Revenue Investigation to file lawsuits claiming a total of Rs24.74 billion in lost revenues in the fiscal year 2020-21.

The claims linked to these two types of offences increased by 51 percent in the last fiscal year compared to a year earlier, 2019-20, when 244 similar cases had been filed claiming misappropriations worth Rs16.37 billion.

The department had filed 138 cases against 431 individuals for revenue dodging and foreign currency misuse in the last fiscal year at high courts and district courts.

The department files cases related to revenue dodging at high courts as per the Revenue Leakage (Investigation and Control) Act, and those related to foreign currency misuse are filed at district courts as per the Foreign Exchange Regulation Act.

It filed 84 cases against 317 individuals for dodging revenues totalling Rs19.81 billion in the last fiscal year. Besides, 54 cases were registered against 114 individuals for foreign exchange misuse amounting to Rs4.94 billion.

“We filed a large number of cases against those involved in producing fake VAT receipts, so the leakage amount is huge,” said Shiva Lal Tiwari, spokesperson for the department.

“Cases related to fake VAT receipts accounted for 50 to 60 percent of total cases of revenue leakage in the last fiscal year.”

Since early 2019, the department has been investigating a new fake VAT invoice scandal similar to the one that surfaced in 2010.

According to department officials, it has either completed or initiated investigations into over 200 firms involved in creating and selling fake VAT receipts and around 1,500 firms using such receipts.

“Our focus now is on completing the investigation against those who purchased such receipts and used them to evade taxes,” he said.

The sellers produced such receipts on a large scale and sold them to various firms charging them for a certain percentage of the value of the receipts.

According to Tiwari, foreign currency misuse also increased significantly in the last fiscal year.

Some of the cases filed by the department involve huge amounts. For example, on March 25 and 26 this year, the department filed cases against the owners of nine firms at the Patan High Court for dodging taxes by using fake VAT receipts amounting to nearly Rs3 billion.

On March 25, the department filed tax evasion cases totalling Rs 2.17 billion against the owners of four enterprises promoted by a single person in collaboration with different groups. The following day, it filed the cases against the owners of five enterprises for dodging taxes worth Rs560.94 million.

On April 23, the department had filed cases against 16 defendants representing 13 firms for dodging Rs2.19 billion in government revenue by selling fake VAT receipts. Arun Kumar Gupta, proprietor of Anil Gupta and Associates and Prabin Kumar Mahato, proprietor of Ankus Trade and Suppliers, were among 16 defendants in the case.

Another big case of revenue dodging was filed at the Hetauda High Court on April 25 this year against Rajesh Gurung, proprietor of Ace Import and Export Pvt Ltd, for dodging taxes through the smuggling of gold. His crime was revealed after police seized 6.28kg of gold from a public bus at Ratomate area of Hetauda Sub-Metropolitan City.

On October 12 last year, it filed a case of revenue dodging worth Rs3.29 billion at Dang High Court against two individuals for gold smuggling. Indian national Sunil Soni and his Nepali accomplice Amit Pariyar have been made defendants in the case after they were found involved in smuggling gold and silver, according to the department. Sunil Soni is the proprietor of Soni Jewellers at Siddharthanagar Municipality in Rupandehi.

On October 8 last year, the department registered a case against Hari Kumar Shrestha, proprietor of High Tech International Pvt Ltd, at District Court, Kathmandu for foreign currency misuse worth Rs 1.71 billion, which is one of the biggest cases of its kind.

Officials and experts say large-scale revenue dodging is a clear indication of poor governance.

“After the fake VAT invoice scandal of 2010, the repeat of similar crimes suggest weaknesses in our system,” said Dirgha Raj Mainali, former director general at the department, who is now assigned at the Revenue Administration Training Centre.

In 2010, the use of fake VAT receipts to evade taxes came to light when the Inland Revenue Department monitored suspicious receipts of two companies dealing in cell phones.

The department arrested a few persons involved in using fake VAT receipts in November 2010. The arrests revealed that even big business houses were involved in malpractices. As the probe progressed, the IRD brought 518 firms under its watch.

Following the probe, it had calculated taxes to be recovered from these firms—VAT amount worth Rs 3.06 billion, income tax worth Rs3.32 billion and excise duties worth Rs205.27 million.