On February 4 this year, the Department of Revenue Investigation filed a case at the Dhanusha District Court against eight people for misappropriating foreign exchange worth Rs4.16 billion through Hundi, an illegal money transferring system.

This, according to the department, is the largest case of foreign exchange misappropriation through Hundi channel.

The department has named Rameshwor Purbe, Mina Devi Shah, Bijaya Yadav, Mokhtar Ahamad, Santosh Mahato, Naresh Mahato, Suraj Thakur and Pappu Kumar Das as the defendants in the case.

A week after filing of the case, the department on February 11 filed another case pertaining to revenue evasion against three persons—Ramesh Dahal, Biajaya Narayan Shrestha and Dinesh Siwakoti— at the Kathmandu District Court. The trio is accused of evading revenue to the tune of Rs. 1.06 billion by registering a company under the name of an unrelated person.

The above two cases are among the largest cases filed by the department in the current fiscal year 2018-19.  

In just seven months of the current fiscal year, the department has filed 89 cases accusing the defendants of misappropriating Rs 13.9 billion through revenue and foreign exchange frauds.   

In the fiscal year 2017-18, the department had filed 1,293 cases of revenue evasion and foreign exchange misappropriation worth Rs5 billion. The largest case filed in that fiscal year was against seven individuals for misappropriating Rs4.14 billion through hundi business.

The fiscal year prior to that, the department had sought legal action against revenue evasion and foreign exchange fraud cases with a total misappropriated amount that was less than Rs2 billion.

The department’s efficiency has certainly improved in recent years, and officials say it is due to the government bringing the department under the Prime Minister’s Office (PMO).

The KP Sharma Oli government brought the department along with the Department of Money Laundering Investigation and  National Investigation Department under the PMO by amending the Nepal Government Business Rules on February 23, 2018.

Once the department was brought under the PMO’s remit, the Finance Ministry, under which the department used to work earlier, snatched the delegated rights under the Income Tax Act, Customs Act and Value Added Tax Act.

Although the department was supposed to use Revenue Leakage (Investigation and Control) Act, it tended to act as per the delegated  authorities under other laws. While using the laws like Income Tax Act, Customs Act and Value Added Tax Act, the department had the rights to determine the evaded tax, and it used to focus on settling the taxes without going to court. “So, the amount related to revenue leakages was small in the past,” said Dirgha Raj Mainali, director general of the department. “Besides, the department is deliberately focussing on large cases.”

Officials said that conflict of interests among the revenue staff could have also played role in determining small amount of revenue leakages in the past.  When the department was under the Finance Ministry, government employees from the revenue stream used to be employed at the Department of Revenue Investigation, customs offices and tax offices. “Chance of being soft towards other revenue staff was high,” said PMO Secretary Sishir Dhungana.

Dhungana, who had also worked as revenue secretary until recently, said that the department appears to have acted independently after it was brought under the PMO.

Fiscal Year    Number of cases    Misappropriated sum

2013-14    795    Rs1.4b

2014-15    890    Rs519.14m

2015-16    962    Rs1.89b

2016-17    744    Rs1.99b

2017-18    1293    Rs5.07b

2018-19    89    Rs13.90b

Source: Department of Revenue Investigation