Prithvi Man Shrestha, The Kathmandu Post, October 13, 2020
The number of non-filers has been growing each year and most of these businesses are not in operation, say authorities.
Tax authorities have told nearly 30,000 firms that have failed to submit details of value-added tax they collected and asked them to clear the dues of up to mid-July 2018 or else face de-registration.
The Inland Revenue Department on Friday released a list of 29,447 firms registered to collect value-added tax on goods and services they sell but who failed to submit details and deposit their collections accordingly.
As per the section 21 (3) of the Financial Act 2020, the tax authority has asked these taxpayers to submit the tax details and pay the tax including 50 percent fine on the top of the tax dues by mid-March next year.
As per the provision of the Financial Act, tax authorities will remove those who failed to submit tax details and pay the tax due until mid-July 2016 from its system. “Even after de-registration, they have to pay the tax dues but the fine will not be charged,” according to the Financial Act.
“We published the list of firms asking them to submit tax details in line with the Financial Act,” said Mukti Pandey, deputy director-general at the Inland Revenue Department. “The government aims to reduce the number of non-filers.”
Non-filers are those who fail to submit tax details on time.
The government also expects to raise a certain amount in tax from these non-filers if they become eager to submit tax details and pay tax.
According to the department, 25 percent of all firms who have registered for value-added tax are non-filers till mid-July 2019. According to the department’s annual report 2018-19, there were 240,460 firms registered with VAT. Of them, as many as 25.1 percent were non-filers of the VAT, up from 23.68 percent in the previous fiscal 2017-18.
The government expects certain revenue collection but not much from the latest scheme.
As of the fiscal year 2018-19, 25,506 non-filers of the value-added tax owed the tax authority Rs5.45 billion. The tax authority has collected tax worth around Rs70 billion so far this fiscal year which is close to the collection during the same period last fiscal, according to the department.
“Almost all non-filers are firms that are not in operation despite registering with the Office of Company Registrar and the tax authorities,” said Pandey. “There may be a very limited number of firms that are running but not submitting tax details.”
Tax authorities are also preparing to release the list of non-filers of the income tax. As many as 48 percent of total individuals and firms registered in income tax are non-filers as of fiscal 2018-19. There were a total of 1,235,412 taxpayers registered for income tax till fiscal 2018-19.
The proportion of non-filers has been on the rise in recent years as their proportion was 46 percent in fiscal 2017-18. Regarding the non-filers of the income tax, section 21 (1) of the Financial Act states that a natural person who has annual transaction of over Rs5 million can submit tax details of fiscal years 2016-17, 2017-18 and 2018-19, pay tax for those years including a fine of 25 percent on tax by mid-March next year.
Such taxpayers will not have to submit any tax details of earlier years and they will not be asked to pay any penalty, fine and remaining interest on them, according to the Financial Act 2020.
In the case of firms whose annual transaction is over Rs5 million and failed to submit tax details of the fiscal year 2016-17, they can also participate in the scheme by submitting tax details, paying tax and a fine of 25 percent on entitled tax by mid-March next year.
“They will be exempted from extra fee and interest,” the law says.
A former official of the department, who refused to be named because he no longer serves at the tax office, said that the number of non-filers has continuously been a problem for the tax authority.
“One of the reasons why there is a large number of errant taxpayers is that they don’t know the requirement of filing their tax details even if they are not running the firms,” the former tax official told the Post. “Another reason is simple non-compliance from some taxpayers.”
According to him, there is a tendency among many taxpayers to register the VAT when they are supplying goods to the government agencies and stop filing the VAT details once they stop supplying them.
“In the case of non-compliance, administrative measures are taken to recover the tax dues,” he said.