According to sources, the Ministry of Foreign Affairs (MoFA) is preparing to send a proposal to the cabinet to render tax exemption on 25 percent of the “foreign allowance” paid to the Nepali diplomats in the missions overseas.
According to Income Tax Act 2058 BS, the remuneration tax is not levied on 75 percent of the foreign allowance while the remaining is taxable. The new proposal means the ministry needs to provide full tax exemption on the foreign allowance being paid to its staffers abroad. According to sources MoFA has already sent a proposal to exempt taxes amounting to Rs 180 million to the Ministry of Finance for its approval. This is an aggregated amount of tax various 37 diplomatic missions of Nepal owe to the government across the past 10 years.
However, finance ministry officials are holding conversations on whether to approve to the MoFA proposal. Officials said the cabinet is probably to accept the tax exemption request if the finance ministry gives its permission. Presently, the sum, 180 million, has been considered as arrears in the report of the Office of the Auditor-General.
Clause 119 of the Income Tax Act-2058 says that in instances where any person does not pay tax on the designated due date for payment of tax, an interest by the normal rate of interest, during every month and part of the month, in the amount due and payable shall be applied on the person for the period during which tax is so due and payable.
Still, MoFA is advancing to bypass the payment of both the tax dues and the interest.
Advocate Kedar Karki claimed that the government cannot implement such tax exemption on the foreign allowance of MoFA staffers in violation of the Income Tax Act. He also asserted that the cabinet is not beyond the law and has no jurisdiction to go upon the law and that the amount must be recovered from the foreign ministry. He argued that it would be an unlawful and immoral thing to do. This will also be prejudiced against the other taxpayers.
Some experts expressed concerns saying that any such waiver will set a bad criterion and discourage people to pay taxes.
A former finance secretary said it is unfortunate to see that those designating Nepal abroad in several positions are involved in fencing remuneration taxes.
The former finance secretary who didn’t reveal his name said that should cabinet gave acceptance to the request; this will show that the government is indifferent toward securing the rule of law and financial discipline and its responsibility toward the people.
Another former finance secretary, Shanta Raj Subedi, said it is not only illegal but also a violation of existing tax-related laws to grant such a waiver. He said this will not just go against the spirit of the tax laws but also inspire people to avoid paying taxes.
It has been unveiled that the parliamentary Public Accounts Committee (PAC) in an illegal manner had directed the government to provide the tax exemption demanded by MoFA.
Earlier, a team of lawmakers serving the PAC had obtained the release of the required budget from the Ministry of Finance at the request of MoFA to fund their visits to various Gulf and European countries.
The five-member committee having its chairman Bharat Shah had returned home after over a week.
Although the team visited various ministries to investigate their condition, it has not yet presented its report.
Many insiders claim that the parliamentary committee is already under the control of MoFA and hence issued the tax-exemption directive to the government.