How Was Tax Evasion of Over NPR 18 Billion Possible?
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NEPSE trading
Anti-Corruption Commission Warns Stakeholders to Take Action
Directive to end collusion between tax inspection officers and traders.
System to immediately enter cleared customs goods into the VCTS.
Call for concrete measures to prevent significant revenue leakage at customs checkpoints.
Directive to review and improve the current tax inspection system.
Appeal to bring informal economic activities under the tax net.
Nepal is grappling with a serious tax evasion problem, with over NPR 18 billion lost to tax evasion, according to recently published figures. The Commission for the Investigation of Abuse of Authority (CIAA) has alerted relevant government agencies to address this situation and take solid action to curb revenue leakage.
According to the Inland Revenue Department (IRD), NPR 11.03 billion in tax evasion was carried out in the fiscal year 2080/81 by using false and fraudulent invoices. The IRD subsequently directed 1,986 businesses to settle evaded taxes. Furthermore, the department has stated that it is currently investigating 2,300 taxpayers for similar issues this year.
Additionally, the Revenue Investigation Department (RID) uncovered NPR 7.3 billion in tax evasion in the same fiscal year and filed cases against 202 individuals. The RID has pledged to continue its investigations this year as well.
CIAA’s Recommendations:
To curb tax evasion, customs procedures should be strengthened, and goods should be promptly entered into the VCTS after customs clearance.
Due to widespread leakage at customs points, the CIAA has urged all customs offices to implement effective reforms.
The Ministry of Finance has been encouraged to bring informal economic activities under the tax net to broaden the revenue base.
The CIAA had previously issued similar recommendations to the concerned agencies, but the lack of implementation has led to renewed pressure for improvement. The commission has also directed the authorities to update and modernize the customs system and implement reforms in the tax system.
The CIAA has emphasized the urgent need to implement its recommendations from the annual report, warning that failure to act could further weaken efforts to control revenue leakage.
