According to the Inland Revenue Department, joint venture construction companies with tax dues of over Rs1 million have a total tax liability of over Rs2 billion, the single largest sector in terms of outstanding tax liability.

There is a trend of forging joint venture among the contractors to secure contracts. Under such an arrangement, usually, a contractor works on a project while others remain as silent partners.

The department has taken action such as freezing of bank accounts, banning export-import and restricting travel on taxpayers who have outstanding tax liability.

Dev and Sayar Construction Company is one of the contractors claiming to have become a victim of the tax authority for non-payment of tax by its joint venture partners in some projects.

“I hope the concerned partner company will settle the tax issue as there have been talks to settle the issue,” Basu Upreti, managing director of the company, told the Post.

With the government struggling to meet the revenue target in the last fiscal year 2018-19, the tax authority had taken these steps to pressurise taxpayers into paying the outstanding dues.

According to the department, it has frozen the bank accounts of around 5,000 firms and individual taxpayers over the last three months. But many of them have failed to get their account unfrozen for failing to clear all or most of the dues.

“Until they pay the maximum amount of their liabilities, their accounts will remain frozen,” said Yagya Dhungel, spokesperson for the department. “If a defaulting taxpayer has money to be received from someone, we are directly receiving payment from the other person to clear the taxpayer’s dues.”

According to him, even after the conclusion of the fiscal year, the department has continued to keep the bank accounts of errant taxpayers frozen.

The concerned contractors have said that the tax authority should be flexible in the case of the companies whose names ended on the defaulters’ list for being silent joint venture partners.

According to them, some contractors have used the documents of their silent partners to obtain multiple contracts without the latter’s knowledge.

“The silent partners are facing penalty despite doing no transactions as joint venture partners,” Rabi Singh, president of the Federation of Contractors’ Association of Nepal, told the Post.

The outstanding tax dues of some joint venture companies, according to Singh, have increased manyfold over the last several years due to fines and interest, making it difficult for contractors to pay all of them.

“We had requested Finance Minister to Yubaraj Khatiwada to make provision where contractors will pay outstanding tax dues without interest and fines. This has not happened,” Singh added.

The contractors are of the view that blanket freezing of bank accounts of all the companies forging joint ventures has created trouble for many contractors.

“The tax office is not ready to unfreeze bank accounts even if the contractors want to pay their share of the total dues,” said Singh.

According to the revenue department, it collected around Rs 10 billion in outstanding dues in the last fiscal year. Since April, the tax offices had intensified efforts to recover tax dues amounting to Rs80 billion by publishing names of the defaulting taxpayers. In order to control the tendency among taxpayers of not paying the taxes in time, the government has made the provision this year where the government agencies would pay the contractors' bills by deducting 50 percent of Value Added Tax at source.

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