-Finance ministry assures brokers of resolving VAT row
-Brokerage firms agree to register themselves for VAT
KATHMANDU, July 2: Stock brokerage firms have agreed to resume trading from Sunday following an understanding with the finance ministry over resolving the issue of Value Added Tax (VAT) on their commission charges.
Earlier on Thursday, stock brokers had decided to halt trading of securities in the secondary market to protest against the order of tax offices to register themselves for VAT and collect tax overdue with them.
They have decided to resume the trading after the revenue secretary sought the resumption of trading in the market as a prerequisite to start process in addressing their tax issue.
“We told them that their problem is not going to be solved by halting trading and that we will facilitate in addressing their VAT overdue problem through discussions,” newly-appointed Revenue Secretary Shishir Dhungana told Republica.
According to Stock Brokers Association of Nepal (SBAN) officials, brokerage firms will start trading in a usual way (without issuing VAT bill on share transactions) for now while they will register themselves for VAT later.
“The revenue secretary has assured us that the ministry will find out a solution to this policy uncertainty on VAT. Since we have not collected VAT so far, we cannot pay such tax as determined by the tax offices for some of the firms. The government has agreed on our demand so we have decided to resume trading from Sunday in the similar way we did in the past until we are registered at VAT office,” said Priya Raj Regmi, president of SBAN.
Brokerage firms halted trading after the tax service offices recently sent letter to two brokerage firms, instructing them to clear their VAT overdue of last four years after assessment of their tax liabilities, fine and accrued interest. Brokers, however, argued that they cannot file such tax which is not their liability as they were not registered with VAT and have not collected that from the investors.
While the VAT was a matter of debate between the brokerage firms and the Inland Revenue Department (IRD) for last few years, the IRD has carried out the VAT assessment of two brokerage firms amid pressure from Office of the Auditor General (OAG) which has put VAT of the brokerage services as arrears. The latest audit report of OAG released in mid-April has stated that there was no progress on its direction of previous years to carry out VAT assessment of brokerage firms with necessary fines.
Rajendra Kumar Paudel, deputy director general at the IRD, told Republica that the brokerage service was VAT-able business and the VAT assessment was a part of the department's campaign to expand the tax net.
According to an official of the IRD, who wanted to be unnamed, the department has given an impetus to clear the VAT from brokerage firms who used to get away from such tax liability in the earlier years due to the growing scrutiny of department's works from the Commission for the Investigation of Abuse of Authority (CIAA).
“Every year the Office of the Auditor General is pointing out arrears in the transactions of brokerage firms while the brokers were getting away with that tax liability. The CIAA is now keeping tab on the auditor general's report and activities of the IRD. We have carried out tax assessment and ordered them to clear the dues. Now they have to come under tax compliance,” added the official.
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