Kathmandu, June 15

The Finance Committee of the Legislature-Parliament has instructed the government to frame transparent procedures and guidelines for tax settlement and also urged for amendment in Tax Settlement Commission (TSC) Act, 1976.

The House panel, today, issued direction to the Ministry of Finance (MoF) to submit the procedures and guidelines as early as possible.

Stating that the TSC Act, 1976 has provided unlimited rights to the members of the commission in settling outstanding taxes based on the request of the taxpayers, the House panel asked the MoF to amend the act so that the commission is not given a free hand in dealing with the disputed cases.

As per the law, tax settlement cases cannot be filed as court cases. The TSC can settle the cases of old dues, those that have missed the deadline to submit application to the tax administration, among others, and the government can form the TSC temporarily based on need.

The last TSC formed in 2014-15 had collected Rs 9.55 billion, which was only one-third of the total tax dues of Rs 30.5 billion from 1,069 disputed cases.

The tax settlement issue landed in controversy after the Office of the Auditor General (OAG) — the external auditor of the government — revealed that the TSC has settled cases of the taxpayers who had not filed tax to the government violating the prevalent tax laws. TSC did not have the jurisdiction to settle such cases, as per the Auditor General Report, 2015-16.

The Commission for Investigation of Abuse of Authority (CIAA) has also been investigating the cases related to tax settlement, taking one of the members of the then TSC and suspended director general of Inland Revenue Department Chudamani Sharma into custody.

The Finance Committee also instructed the revenue administration to recover the taxable amount from the taxpayers, who have been provided favourable treatment following the investigation of CIAA. The House panel has asked the revenue administration to expand the tax net, establish an efficient and effective monitoring mechanism to control revenue leakage and recovery of tax dues, effectively implement the tax laws and introduce the taxpayer-friendly modern tax system.

The MoF has also been asked for the internal transfer of tax administration staffers within a certain time so that he or she is not handling the same assignment for a long time. The House panel also asked the finance secretary to carry out regular monitoring of Inland Revenue Department and Inland Revenue Offices.