Govt yet to resolve Ncell’s CGT issue

Kathmandu, January 25

Millions of people who have subscribed to Ncell’s services are being deprived of 4G (fourth generation) facility simply because of government’s inability to resolve the taxation issue related to the sale of the private telecom company by TeliaSonera to Malaysian telecom operator Axiata.

Citing that Ncell needs to first pay the capital gains tax (CGT) for the transaction between TeliaSonera and Axiata, lawmakers are against allowing Ncell to launch any new service before it clears CGT as required.

Moreover, the Public Accounts Committee (PAC) of the Legislature-Parliament, on Tuesday, directed the government not to give 4G licence to Ncell until the tax issue is resolved. Owing to concerns raised by the lawmakers and direction from parliamentary committees, Nepal Telecommunications Authority — the telecommunication sector regulator of the country — has not yet taken a decision on the 4G rollout plan that Ncell had submitted a while ago.

The tax issue has made the headlines time and again since over a year and parliamentary committees like PAC and Development Committee have also held discussions on the matter numerous times and instructed the Ministry of Finance (MoF) and related agencies to provide clarity. Just two weeks back, PAC had even directed MoF to collect all necessary taxes from Ncell within three months.

Despite all this, the MoF continues to remain mum about who is liable to pay the CGT — TeliaSonera, Axiata or Ncell — for the record deal of Rs 143 billion between TeliaSonera and Axiata.

“PAC has given us a direction and we are working on it, but nothing has been decided yet,” said Ramsharan Pudasaini, spokesperson for MoF.

In the meantime, this dilly-dallying by the government has directly affected millions of Ncell subscribers as they have not been able to experience the latest 4G technology, which Nepal Telecom (NT) launched on January 1 in the Valley and Pokhara.

As per NTA’s statistics, Ncell has 11 million active users out of 14.9 million of its SIM cards distributed in the market.

“It is an injustice to not allow us to adopt the latest telecommunication technology and deprive our 15 million customers from experiencing 4G. I do not see any point in disallowing Ncell to launch this technology,” Simon Perkins, managing director of Ncell, told The Himalayan Times, adding that the government should come up with a decision on the taxation issue without delay and allow the company to adopt the latest telecommunication technology.

However, Ncell has not been openly commenting on the CGT issue saying that it is a worldwide practice for the seller to pay such tax.

Speaking during the PAC meeting last week, Digambar Jha, chairman of NTA, had opined that the CGT issue and the one related to giving Ncell the 4G licence have to be dealt with separately so that millions of Ncell customers are not deprived of using 4G service.

Whether Nepal can impose capital gains tax on Ncell buyout deal has been heavily debated ever since TeliaSonera announced its decision to sell 60.4 per cent of its stake in Ncell to Axiata for $1.03 billion.

While some argued the government should tax the deal, others were against it as the deal was taking place abroad, and the Income Tax Act of Nepal does not have clear provisions on offshore deals.