Tax Transparency: We Should Have a Good Debate

Siromani Dhungana

IMF working paper on ‘VAT Fraud and Evasion: What Do We Know and What Can be Done?’ says: Like any tax, the VAT is vulnerable to evasion and fraud. But its credit and refund mechanism does offer unique opportunities for abuse… After introduction of Value Added Tax (VAT) revenue in 1997, Nepal’s tax administration has been facing many challenges to effectively implement it. Multi-million VAT fraud scam was one of the serious threats faced by Nepal’s tax administration. The scam has once again come to limelight after Nepal’s tax administration — Inland Revenue Department — has moved to the Supreme Court challenging the decision taken by National Information Commission which had directed the government to reveal the detail of VAT fraud.

VAT Fraud in Nepal

In fact, 518 firms were not taxpayer but fraudsters. They had not tried to evade or avoid their tax compliances. The case was more complicated in nature since the fraud, according to officials involved in investigation, could ruin the entire economic system of the country if tax administration had failed to identify the problem on time.

These firms had made false claims for credit and refund by presenting forged invoices for non-existent or exaggerated purchases and succeeded to take rebate from state coffer to the transactions which were never happened in reality.

Inland Revenue Department – had completed the investigation of 518 firms involved in Value Added Tax (VAT) scam that had tarnished the image of the private sector in April 2012. The department had assessed a total of Rs 6.59 billion revenue — Rs 3.06 billion VAT, Rs 3.32 billion income tax and Rs 205.27 million excise — from the investigation.

Concluding the investigation director general at IRD Tanka Mani Sharma had said: “the trend of under-invoicing, attempt to avoid VAT and producing fake VAT invoices by creating fictitious transactions have been found during investigations.” He had also said that traders, contractors and firms across the country were involved in robbing national coffers by producing fake VAT bills.

Debate: Revenue a Public Information or Not

From the very beginning, there was tussle between civil society members and tax administration regarding information of VAT fraud. On the one hand, civil society members advocated for the reveal of entire information claiming that getting tax information is peoples’ right to know. However, tax administration constantly denied the name of firms and businessmen to reveal citing Nepal’s Income Tax Act.

Later the dispute reached to the National Information Commission (NIC) which directed Finance Ministry to provide the detail information of VAT fraud in July, 2011.

Giving its final verdict in October 2011 to the complaint lodged by Freedom Forum, National Information Commission has directed the Finance Ministry to reveal the names of VAT evaders. Concluding that the people have the right to know about their tax amount, the commission directed the government to reveal the name of firms involved in VAT fraud.

A New Twist

Quite paradoxical that Nepal’s tax administration is trying to protect them under Income Tax Act and Value Added Tax (VAT) Act. Civil society members claim that this is a direct protection of VAT defaulters by Nepal’s tax administration.

Nearly two years after the decision of NIC, Nepal’s tax administration approached the Supreme Court on February 20 asking it to annul the decision taken by NIC regarding public disclosure of VAT scam.

Tax can never be an issue of public interest in Nepal and businessmen and officials at tax administration, from their attitude, are trying to prove that tax is collected due to their effort, opines Kathmandu-based revenue analyst Anirudra Neupane.

The question whether tax issue should be public or not has been raised after the move of the tax administration. Chairperson at Freedom Forum Tara Nath Dahal says: “It was not simply a scam of tax evasion or tax avoidance. Some big and reputed companies, traders and business firms had involved in Value Added Tax (VAT) fraud producing counterfeit invoice. They produced fake invoice and claim refund to the transaction which were never happened in reality.”

General public are real taxpayers and they have right to know the status of their tax money, adds Dahal. But, tax administration in Nepal is trying to establish the notion that tax is not an issue of public disclosure by challenging the decision by NIC.

In spite of criticism from different quarters to prosecute criminal charge against businessmen and firms involved in the biggest robbery of state coffer, Nepal’s tax administration has been constantly protecting VAT defaulter invoking Income Tax Act which is not natural, says Dahal.

Gravity of the Issue

“Using fake VAT bill is a serious crime that equals to using fake currency notes,” former Finance Minister Bharat Mohan Adhikari had said during interrogation by then parliamentary Public Accounts Committee in March 2011.

The government should respect taxpayers but not fraudsters, according to Krishna Sapkota who has been closely observing VAT scam. The move of Inland Revenue Department has raised the question of role of Nepal’s tax administration.

In principle, the government should spend tax money in transparent manner but the latest move of IRD will be a stumbling block to civil society’s campaign of making tax issues transparent, says Sapkota.

Even poorest of poor people contribute taxes to government’s treasury, adds Sapkota. How the tax administration can protect the persons involved in cases which, according to responsible minister, is equal to produce fake currency.

If revoked from the Supreme Court, it will be serious setback to Nepal’s Right to Information movement, according to him.

Solution: Reform in System

Transparency and accountability should be at the core within the tax system in democratic country. The government should respect and protect taxpayers but not fraudsters. For that, national tax law and policy should be transparent. Public disclosure of tax will help reduce tax related fraud and maintain transparency in tax regime. Greater tax disclosure will create a fair and sensible approach in tax system. Transparency in tax should be in center of debate in Nepal’s tax policy and governance. The government should take the discourse created by VAT scam to bring about reform in VAT regime in the country. However, the government should not forget that it should be responsible to the real taxpayers. Accountable government should treat all taxpayers equally and tax administration should not act in a manner where public can feel discrimination between rich and hardcore general public. In fact, tax money is public money and all citizens has right to know on its spending.

Political Stagnation and Maoists

In textbook of science in high school, we used to read the scientific definition of ‘work’: using a force to move an object to a certain distance. Or, using force is not enough to define work. It seems our leaders have been putting excessive force but no progress in distance front. Their efforts have failed to deliver any results and their relevance in the country’s politics has expired though they think that the country cannot move ahead without them.

Siromani Dhungana

UCPN Maoist chairman Prachanda roared at his party’s seventh General Convention in Hetauda: ‘I will come up with a formula’ to end current political stagnation that opposition parties cannot disagree with.’

He did it. He floated the idea of Chief Justice (CJ)-led government for holding elections. Top guns of other political parties admired his idea and followed him in a submissive manner. Leaders of so-called democratic parties even did not discuss the idea within party mechanism.

And, even after putting ‘tireless’ effort since the first week of February, they have failed to show the result. Accordingly, CJ Khil Raj Regmi denied to lead the election government citing possible unwarranted pressure from political parties.

Neither could they convince the chief justice to form an election government nor could they float any alternative idea to move the country ahead. In fact, top guns of political parties have created a situation of political stagnation putting citizens at the receiving end.

Peoples’ hope for political reforms have faced a severe obstacle due to and their decision to give Maoists a try (during Constituent Assembly election in 2008) have gone futile.

It has been proved that Maoists are good players of blame-game. During decade-long bloody insurgency, Maoists used to blame ‘expansionist’ and ‘feudalist’ forces including royal palace for wrongdoings and malpractices in politics. And, during CA election, they came down heavily on Nepali Congress (NC) and UML.

In rabble rousing speeches, they tried to persuade people saying peoples’ lifestyle would change if monarchy were abolished and a Maoist-led government was established in Nepal. People were told that they could be master of their own destiny and their dream of prosperous life would come true once the Maoists held power.

Maoists came into the power and have been holding absolute power for some time now. The question is: where are their promises now? Forgetting insurgency-era promises, all leaders in the party have been doing nothing more than creating an era of political stagnation.

First, they forgot the ‘Prachanda Path’ — the brain child of Prachanda — and they also forgot their own promises which were made during decade-long insurgency and they forgot their political consumers, that is, faces of ‘proletariat’. In sum, they forgot the entire political philosophy and ideology based on which they had started decade-long insurgency. They are now a deviated communist party clever enough to betray people.

Immediately after their entry into peaceful politics, deputy of UCPN (Maoist) Dr Baburam Bhattarai dubbed CPN (UML) ‘Hing Badheko Talo’ and had claimed that the relevance of CPN (UML) had expired since Maoist was real ‘Hing’. Comrade Bhattarai aka Laldhoj, can you claim your party ‘Hing’ at this point of time? If your party is still ‘Hing’, what about break away faction or Baidhya-led Maoist?

It has been proved that Maoists are far ahead in creating catchy jargon to persuade people. It is for sure that they will create dozens of jargon to be sustained in the politics. But, I know they will lead us into nothing than political stagnation and perennial vacuum.

A Maoist Attempt of Merging the Judiciary into the Executive

Appointment of the SC Chief Justice as the Prime Minister will be Supreme injustice to the people of Nepal.

Political parties in democracy can, of course, be good or bad but most certainly without a capable leadership of political parties, the democratic system will never be anything but bad. –tweaked version of Albert Camus’s quote on free press

By Siromani Dhungana

On January 30, before the Maoists proposed appointing incumbent Supreme Court Chief Justice as Prime Minister, I had written in in this blog: “Democracy in Nepal is on the verge of collapse. Most of the indicators of democracy are either dismantled or dead. The basic notion of democracy- ‘check and balance’- has been destroyed and now there is only the check of the communist-led government.”

Unfortunately, the Maoists have proved me right yet again with their flabbergasting proposal. You don’t have to be a political scientist to know what the Maoists are trying to do is completely against the basic notion of democracy, that is, the check and balance. And, incompetent and shortsighted opposition parties are once again going to be fooled by the UCPN Maoist. And that will cost Nepal’s fledgling democracy dearly.

The propose of appointing incumbent chief justice as the Prime Minister of the country has apparently showed that the largest political party of Nepal is trying to ruin the basis democratic concept ‘check and balance’ among major state organs — judiciary, executive and legislature.

If materialized, the Maoist proposal will not only ruin completely the independence of judiciary but also jeopardize the entire justice system of Nepal. On the other hand, it will also help undermine the importance of political parties in Nepal which will have repercussion in the long run.

It is for sure that the Maoists want to resume their war-time ‘kangaroo courts’ which they operated in villages in a direct challenge to the existing judicial system. Even after ending armed conflict in 2006, the party had floated the idea of reviving ‘kangaroo courts’ in 2007 in an effort to step up pressure against the then interim government headed by NC leader Girija Prasad Koirala.

The Maoists never believed in current judicial system in Nepal. They have constantly argued that this is the one State organ that still represents that feudal, old Nepal. They have constantly flouted Supreme Court decisions. Their senior leaders, including the PM, have every now and then spoken against the judicial system and courts in general. They think, after controlling executive and having had largest number of seats in legislature parliament (dissolved in May 2012), the judiciary is the last  bastion that still remained out of their sphere of influence. The fact that the Maoists couldn’t win notable number of seats in the recently held elections of national committee of Nepal Bar Association despite fighting polls against democratic candidates in partnership with the UML-supported lawyers shows their poor presence in judicial sector.

And now, suddenly, they have this new-found trust in judiciary! Doesn’t sound plausible at all. Those who have been criticizing and flouting judicial decisions are now suddenly seeing ‘most independent and trustworthy’ person in the head of the same judiciary.

And at a time when the SC is already stretched- and is functioning with only around half of dozen judges and can’t fulfill vacant positions because there doesn’t exist a mechanism in the absence of parliament.

And at a time when the SC has issued quite a few orders staying or stopping several controversial decisions of the Maoist-led government including in the case of Dekendra Thapa. Continue reading A Maoist Attempt of Merging the Judiciary into the Executive

Cooking Gas Price Hike: Maoists Take People for a Ride

It seems ‘people’ is one of the most sellable words for Nepali communists. So what about war? Nothing more than a business strategy for the hammer and sickle lovers. ‘Proletariat‘ are their clients whom they can easily sell their product, that is, ‘false hope of prosperity’. Activities of UCPN (Maoist) in Nepal are glaring evidences.

By Siromani Dhungana

In yet another controversial decision, the Maoist-led government has decided to jack up price of Liquefied Petroleum Gas (LPG) by Rs 630 on a cylinder which will certainly hit the consumers’ lifestyle who already has been facing rampant inflation.

I do not mean that the government should not hike the price of LPG. But, my point here is the price hike by Rs 630 at once this time is irrational and illogical. It is to mention here that the government has apparently failed to rein state-owned fuel supplier Nepal Oil Corporation (NOC) and has put consumers at the receiving end to mask failure of corrupt government officials and NOC management. Continue reading Cooking Gas Price Hike: Maoists Take People for a Ride

The Maoist Idea of National Productivity: More Cash for the Party

King Mahendra reportedly said in the mid-1960s: “Communism does not travel in a car.”

Some say he used the word ‘truck’, not ‘car’. Whatever. I think, communism does not but communists do. Communists travel in the most luxurious vehicles according to their availability. Nepal’s ruling UCPN (Maoist) is an example how controversial communists can become when they struggle to maintain a balance between their ideology and lifestyle. The party floated new jargon in its just concluded seventh General Convocation, that is, national productivity.

Is this concept a major paradigm shift in ideology of UCPN (Maoist)? What is the covert intention of chairman Prachanda? Can Maoists translate concept of national productivity into action? And can they bring about any changes in lives of ‘proletariats’ for whom they claim to be engaging in politics.

By Siromani Dhungana

Surrounded by Pulsar-riding cadres of Young Communist League (YCL) and party leaders who have already elevated themselves to the elite class from the proletariat that they were until recently, and flanked by his Mustang-rider deputy Dr Bhattarai talks about austerity but indeed encourages corruption, nepotism and favoritism in his government, comrade Prachanda announced in the Hetauda Convention that his party will be focusing on national productivity.

That announcement didn’t come at a surprise to those who are familiar with inherent nature of UCPN (Maoist) – which is popularly known as ‘cash Maoist’ (as opposed to the dash Maoist, the Mohain Baidya led CPN-Maoist) due to the party’s excessive focus on amassing ‘cash’ through intimidation, forced donation and brazen corruption.

I do not think, the concept of national productivity will bring any differences in ideological front of the ruling party. His concept of national productivity neither supports capitalist economic system nor socialist. Rather, I think, there are two implied meaning of Prachanda’s proposal: to maintain a hold on all economic/financial resources and to divert attention of his cadres from political issues to other less contentious issues. Continue reading The Maoist Idea of National Productivity: More Cash for the Party

Dear Comrade Prachanda….think before using the word ‘democracy’

Before calling Baburam a democrat, Prachanda should answer the following questions:

By Siromani Dhungana

Speaking at the seventh General Convention of the UCPN (Maoist) in Hetauda on February 2, comrade Prachanda, after encouraging his followers against main opposition Nepali Congress, posed a close-ended question to his cadres: “Is Baburamjee against peace and constitution? Is he an undemocratic leader?”

His cadres clapped and laughed but did not dare to answer because it was a close-ended question and Maoists cadres are not free enough to oppose their headquarters.

Dear comrade, yes you and your fellow incumbent Prime Minister (Baburamjee) both are indeed undemocratic leaders. Your deputy has dual character. He talks about uplifting lives of the poorest of poor but in practice he does nothing for them. In an interview with the Indian newspaper DNA, he says:

Q: Yet, Maoists in India are popular with the poorest and with many intellectuals, including the likes of Anuradha Ghandy, whose memorial lecture you will be delivering. So why did it not capitalise on this support?

A: (Smiles) I think this is for the Marxists and Maoists of India to asses as to why they failed to make an impact. But seeing this from a theoretical level, parliamentary democracy does not address the problems of the poor masses and people in backward countries like India and Nepal. There is too much disparity, with one section enjoying the fruits of democracy and the majority in the country — the dalits, the tribals, the women, the poor — are deprived of their genuine democratic rights. This contradiction is there. I think the radical communists are trying to champion the cause of the downtrodden.

Comrade Prachanda, your deputy thinks ‘parliamentary democracy does not address the problems of the poor masses and people in backward countries like India and Nepal’. So, which is the most suitable model of democracy for a country like Nepal? Continue reading Dear Comrade Prachanda….think before using the word ‘democracy’

Nepali Politics is a Game of Corrupt Rulers versus Incompetent Opposition

It’s very simple to understand current Nepali politics. It’s a game between two blocks. One is incompetent and the other is extremely corrupt. Yes, the ruling leaders are cunning, corrupt, and hell bent on extending their tenure at the cost of national consensus. What about the opposition leaders? Are they serious and capable to end country’s political impasse? Can they ensure change that the people want to see in politics? The answer, unfortunately, is a big NO.

By Siromani Dhungana

One thing is for sure. The ruling parties have a clear objective: they want to make a lot of money before they leave the government. Leaders from ruling parties are cunning enough to create a catchy phrases and jargons against parties in opposition. They are good at blame game.

What about opposition leaders? They are good for nothing. They do not have a clear agenda, plan, tactic, or vision to solve immediate and long-term challenges that the country faces. Moreover, the high level leadership of opposition parties – namely the Nepal Congress and UML – is not capable to fight against or challenge tactics applied by the UCPN Maoist in Nepal’s politics.

I do not mean that leaders from NC and UML challenge Pushpa Kamal Dahal in changing tones and tactics every second day or rely on propaganda as the Maoists are doing. Nor they should give ‘false hope’ and sell ‘dream of Switzerland’ to people as Maoists did during the insurgency and continue to do so even now. Continue reading Nepali Politics is a Game of Corrupt Rulers versus Incompetent Opposition

We Have a Government That Behaves Like the Opposition

The question in political landscape at present is what happens when ruling parties adhere to ‘hate speech’? Are our ruling parties indulging in ‘black propaganda’? Or they lost their conscience to be a responsible government? Many have started to realize that this government does not represent sentiment of people. This is not the government of Nepali national character. Rather, this is the government of Maoists and some Madhesis who, rather than representing the people, are solely focused on making money, amassing resources from the national coffer.

By Siromani Dhungana

In a bizarre demonstration of a weird political culture, leaders from the ruling parties have been behaving and speaking like the opposition parties.

In a joint gathering of the Federal Democratic Republican Alliance (FDRA), leaders from ruling UCPN (Maoist) and its political allies Madhesh-based parties blamed opposition Nepali Congress and CPN-UML for being stumbling block to the peace process. They, however, did not reveal what the government has been doing in a concrete manner to forge consensus.

As polarization among political parties increases sharply, UCPN (Maoist) Chairman Pushpa Kamal Dahal on Wednesday warned that the Nepali Congress (NC) will be “annihilated” if it fails to keep up with the “aspirations of the people,” reports The Kathmandu Post.

According to media reports, leaders of political parties warned opposition parties to finish or to be finished. Media coverage regarding FDRA’s mass gathering does not suggest that ruling parties are in a mood to forge consensus.

It is shameful that political parties who have been ruling the country for 18 months are trying feign ignorance about the current political deadlock. Is this game of hurling blames by the ruling parties justifiable? Are they the ‘clean flocks’ as they claim to be?

In democracy, ruling parties should show their democratic commitment and magnanimity to take opposition into confidence. But recent statements from leaders of ruling parties show that they want to play the role of opposition as well. Principally, ruling parties should take all opinions into consideration to make their decision a truly national decision. The government should have capacity to listen peoples’ discontent and dissatisfaction. The government should also listen to voices of opposition parties raised peacefully.

However, all these expectations have been a far cry for Nepali citizens.