Capital gains tax issue: PAC fiat not to issue 4G licence to NcellPublic Accounts Committee (PAC) of Parliament has directed the Ministry of Information and Communications (MoIC) and Nepal Telecommunications Authority (NTA) not to allow Ncell to introduce 4G and other services until its capital gains tax issue is resolved.
Public Accounts Committee (PAC) of Parliament has directed the Ministry of Information and Communications (MoIC) and Nepal Telecommunications Authority (NTA) not to allow Ncell to introduce 4G and other services until its capital gains tax issue is resolved.
PAC had on January 15 directed the Ministry of Finance to determine the capital gains tax and collect the amount within three months. Subsequently, the committee had summoned MoIC secretary and NTA chairman on January 17 to discuss the matter.
Axiata, a Malaysian telecom company, acquired an 80 percent stake in Ncell for Rs 140 billion ($1.4 billion) last year in the biggest acquisition deal in Nepali history. Axiata acquired 60.4 percent of Ncell’s shares from TeliaSonera, a telecommunications service provider in the Nordic and Baltic countries, Eurasia and Spain, and another 19.6 percent from SEA Telecom Investments BV, a company owned by Kazakhstan-based Visor.
PAC is of the view that the government should collect Rs 23 billion from TeliaSonera in capital gains tax.
Ncell has deposited Rs 9.97 billion as 15 percent withholding tax, or tax deductible at source for capital gains, with the government. The tax authorities are undecided over the actual amount to be paid by TeliaSonera that exited Nepal after selling its stake to Axiata.
“If we see the data of recent years, Ncell has been generating revenues of around Rs 64 billion and earns around Rs 29 billion in profits annually,” said Nepali Congress lawmaker Ram Hari Khatiwada. “Why is it dilly-dallying to pay just Rs 23 billion in tax?” the lawmaker wondered.
Parliamentarians Bharat Shah, Dhan Raj Gurung, Pashupati Chaulagain, Hari Prasad Nepal, Ek Nath Dhakal, Rishikesh Pokhrel, Anand Prasad Pokhrel and Rajendra KC, among others, were of the view that the government’s failure to collect tax from Ncell would set a wrong precedent.
Some of them said that the government should be directed to even “shut down” Ncell if it fails to abide by the country’s laws.
A few PAC members, however, had reservations over this statement.
Former information and communications minister Minendra Rijal said that it wouldn’t be a wise decision for the committee to issue such a strict directive at a time when tax authorities had not been able to determine the applicable tax amount.
“How can we ask a company to pay tax that hasn’t been set by tax authorities?” Rijal said, hinting that the country’s financial authorities were to be blamed for TeliaSonera’s exit from the country without fulfilling its responsibilities.
CPN (Maoist Centre) lawmaker Yogendra Tamang said that the House panel should summon Ncell officials and conduct further studies before making a decision.
Ncell had sought permission to launch 4G service in July from its existing frequency of 1800 MHz.
Although the NTA has not awarded the licence, it has asked for a rollout plan from Ncell. Before asking for the rollout plan, the NTA generally awards a technology neutrality licence, which paves the way for telecom companies to use 4G service from their existing frequency.
Although Ncell is yet to obtain a technology neutrality licence, the NTA’s decision to ask for a rollout plan, many say, indicates that preparations are underway to issue a 4G licence to the telecom company.
Finance Committee of Parliament in June last year had directed the government to collect tax and bar Ncell from rolling out other services and injecting capital. However, the NTA approved a number of Ncell’s business plans saying that it had received no such directives from the committee.
Likewise, on January 17, NTA Chairman Digambar Jha had told the House committee that it may not be able to stall 4G licence to NCell under the pretext of non-payment of capital gains tax as tax authorities had not formally informed it about
the telecom company’s tax liabilities.