When telecommunication service provider, TeliaSonera sold 80 per cent of its shares to the Malaysian company Axiata last year it tried to dodge paying capital gains tax in Nepal, saying it was not within Nepal’s tax jurisdiction because it was an offshore transaction. International law and Nepal’s own laws dictate that the seller is entitled to pay tax on the profit made. Nepal’s tax authorities started the process of getting payment only after TeliaSonera had sold its shares and left the country. In fact, for a full year after TeliaSonera left Nepal, the tax office hasn’t even figured out how much Nepal is owed in tax.
This is all very fishy, and there are plenty of grounds to believe that Nepal’s tax administration and politicians were under the influence of TeliaSonera. Furthermore, a responsible official from the Large Tax Payer’s Office telling the Public Accounts Committee (PAC) of Parliament that TeliaSonera did not have to pay tax is in itself suspicious. In fact, the official must himself be investigated, as well as the conduct of a Swedish company that prides itself in zero tolerance about corruption.
Tax laws follow fairly clear rules and regulations. The tax administration has the authority to determine who should pay, how much, and how it should be collected. The fact that a senior official of the Large Tax Payer’s Office (LTPO) is letting TeliaSonera off the hook in the PAC hints at large amounts exchanging hands. The Cabinet decided last Thursday to instruct the Finance Ministry that as per accepted international norms, it was the seller’s responsibility to clear its capital gains tax. But far from trying to redeem the tax, the LTPO hasn’t even calculated the tax amount due.
In response to letters demanding payment, TeliaSonera has argued that the $1 billion sale was done in the tax haven of St Kitts and Nevis and therefore it had no responsibility to pay Nepal tax. Payment of the tax would strengthen the rule of law and restore investor confidence in the couintry, as well as dissuade future tax dodgers. There should be an investigation and prosecution of whoever allowed the country to be deprived of tax revenue.