On May 8, Nepal’s Department of Revenue Investigation (DRI) initiated legal action against a construction firm, seeking approximately Rs 1.2 billion as compensation for alleged tax fraud.
The Directorate of Revenue Intelligence (DRI) submitted a petition valued at Rs 1.2 billion to the High Court in Patan against Dhruba Construction Pvt Ltd, a firm involved in contracting, providing consultancy services, and trading building materials. According to the DRI, they have sought the recovery of Rs 1.209 billion from the business owner, Dhrubadev, as well as an accompanying prison sentence.
Based on the DRI’s findings, there is a shortage of Rs 458 million in VAT and Rs 146.5 million in income tax. According to subsection 1 of Section 23 of the Act, they have called for the recovery of these amounts plus a 100% penalty of Rs 604.6 million, which adds up to Rs 1.2 billion, as well as potential imprisonment as outlined in Section 23 of the Act.
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The investigation found that the company’s director, Dev, who is based in Kathmandu Metropolitan City-31 in New Baneshwor, issued invoices without actually delivering the products and services.
After discovering that the firm neglected to process payments via bank transfers, issued invoices out of sequence, omitted submitting VAT and income tax returns, and provided inaccurate information regarding VAT and income taxes, the DRI initiated legal action against them.
The firm was unable to confirm the origin of its purchases and did not comply with legal requirements for paying value-added tax (VAT) and income tax. Due to these violations, the DRI submitted a chargesheet under Section 3 of the Revenue Leakage (Investigation and Control) Act, 2052.
The DRI has taken up cases concerning revenue loss, improper use of foreign currency, illegal gold trafficking, and breaches in custom duties. They persistently probe into significant financial offenses like tax dodging, fraudulent activities at customs, and manipulations within foreign exchange markets. This agency scrutinizes industries with higher risks of tax avoidance and various economic violations before proceeding with pertinent litigation.
Likewise, the DRI, which operates under the Prime Minister and Council of Ministers Office, has faced criticism regarding its efficiency. A top-tier committee focused on economic reforms, led by ex-Finance Secretary Rameshwar Khanal, proposed dissolving the DRI. This panel advised restructuring the Revenue Tribunal, transferring tax investigation responsibilities to different governmental bodies, and eliminating the DRI altogether.
The recommendations committee contended that inquiries regarding improper use of foreign currency inherently qualify as money laundering violations. They asserted that the Department of Money Laundering Suppression would be appropriate to manage these matters, and suggested that entities tasked with collecting non-tax revenues ought to oversee leakages within their jurisdictions.
Similarly, the recommendation committee proposed moving cases related to internal revenues to the Inland Revenue Department, customs matters to the Customs Department, and instances of foreign exchange mismanagement to the Department of Money Laundering Prevention. They also pointed out that the Inland Revenue Department should oversee where goods exempt from custom duties end up and handle the management of an online monitoring system.
Published by HT Digital Content Services with authorization from Republica.
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