POKHARA, Oct 18: Inland Revenue Office (IRO) in Pokhara has found a large number of hotels and also the service sector firms in the Lake City of evading value added tax (VAT) by not properly disclosing their transactions and VAT collected from the customers.
Not just the small hotels, even the big hotels in the city have been found evading tax since years, said Laxman Kumar Basnet chief of the IRO Pokhara. He, however, did not disclose the names of those hotels and service firms, referring to sensitivity of the case.
“All I can say is we have intensified our vigilance against all the tax evaders and even taken initiatives to freeze the property of four very well known hotels of the city for their wrongdoings,” Basnet told Republica.
Pokhara has around 500 hotels ranging from tourist class to five star. “Unfortunately, a great majority of them have been veiling their transactions, and paying only a meager revenue, siphoning off the taxpayers´ money into their individual pockets,” said Basnet.
Apart from the hotels, the IRO has reckoned a huge tax evasion by a large number of educational institutions, hospitals and nursing homes. Evasion of rental tax too has been found rampant.
Going by the existing law, service entities that collect 13 percent VAT from the customers need to hand it over to the government within the 25th day of the month. Likewise, landlords who have rented or leased out their property too need to pay 10 percent rental tax on their rental income.
The IRO had commenced its investigation when an hotelier on Sunday attempted to file meager Rs 400 in VAT. “His transactions drew our attention. We instantly investigated his unit and found huge leakage. Eventually, the hotelier cleared all his dues,” said an IRO official.
Following the incident, the IRO had launched intensive investigation against hotels and other service firms.
“The preliminary findings of the study have taken us by surprise. Their act of collecting VAT from the customers, but not handing it over to the IRO reflects a serious moral hazard and extent of financial crime in the market,” Basnet stated.
Following such finding, the IRO has commenced further in-depth investigations against the tax evaders. It has started a study on rental tax. “We have begun developing profile of business outlets, complexes and office areas in Lake Side and Chipledhunga,” said Basnet.
Once the team submits its findings, Basnet said the IRO would take strong steps to enforce the rental tax.
Moreover, the IRO has also organized interactions with the local entrepreneurs and made them aware of troubles they could land into for flouting the law. “Hopefully, our awareness campaign will have a positive impact,” said Basnet.
According to IRO, the number of taxpayers in Pokhara stands at 40,000. Of them, 7,000 firms are registered with VAT. The IRO collected Rs 450 million in VAT over the first three months of this fiscal year. Basnet said the collection was higher than that mobilized in the same period last year.