New Property Tax Act in the offing

KATHMANDU, Sept 27: The government has started drafting a new law on property tax, which, once implemented, would force all Nepalis to compulsorily declare and pay tax for property owned by them.

The new Property Tax Act would tag all undisclosed property as illegal possessions and provision stringent punishment to such property holders, said a member of the task force that has already finalized the concept paper for the law that it is drafting.

“The law will also compel the government to develop a mechanism for maintaining digitized and easily traceable records of property, including cash in bank, investments made on gold, bonds, shares, land and houses, among others,” he told Republica.

Going by this law, all Nepali citizens and investors in Nepal would need to compulsorily register their property and businesses with the government. Fundamentally, the new law has been pushed in a bid to bolster and ensure effectiveness of Anti-money Laundering Act.

“Unless we have initial records of property owned by individuals, it will be difficult to prove that property was earned illegally. We will also face difficulty to take action necessary action against money laundering,” said the source.

However, as the state lacks organized records of property held by individuals so far, senior revenue officials have pushed the government to allow people to disclose and legalize their property once by paying certain minimal tax.

Government to allow public to declare property before enforcement “Basically, the government has already promised such amnesty for one last time through the budget for the current fiscal year. Our assessment only reinforces the announcement of such a scheme,” said the source.

Laxman Aryal, coordinator of the taskforce formed by the Ministry of Finance (MoF), said the taskforce´s recommendation to the government was not to announce amnesty scheme for all but only for the people holding certain amount of property.

The amount for amnesty, he elaborated, would be moderate so that large number of people could easily comply with it and those holding unnaturally high volume of undisclosed property could be left out.

“We need to do this because our international commitment on anti-money laundering does not allow us to legalize ´black´ money,” said Aryal.

Along with Aryal, who is the deputy director general of Inland Revenue Department (IRD), the task force has a member each from finance ministry and law ministry and two members from IRD. Although the government had asked the taskforce to prepare the draft of the new Act by mid-October, Director General of IRD Rajan Khanal said it would handover the draft to the government by mid-November 2011.

Once the new Act is finalized, which officials anticipate to be done by the end of this fiscal year, the source said the government would announce Voluntary Disclosure of Property for 2011/12, providing amnesty to general public for the registration of their property against payment of certain ´nominal tax´.

“The amnesty will be announced simultaneously with the enforcement of the new Act. And once the amnesty period ends, IRD and the Department of Money Laundering Investigation will come into action,” said the source.

Imposing property tax is not a new concept in Nepal though. The government had enforced a separate Property Tax Act (PTA) in 1990. However, the Act remained unimplemented due to the lack of proper database on property and mechanism to enforce it.

Capital Gains Tax imposed on shares and land transactions, and house and rental tax charged by local bodies are some of the concepts of PTA 1990 that IRD later incorporated in the Income Tax Act.

Source:myrepublica

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