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My Two Paisa
Guilty until proven innocent


Last week, the who's who of the business sector made it to the front page of almost every daily in the country. But for the wrong reasons. The businesses were in a list of more than 500 companies involved in VAT evasion scam, released by the Ministry of Finance following a directive from the Rastriya Suchana Ayog.

Neither the business houses nor tax collectors have a very good track record in Nepal. So when people turned on their tv sets on that evening, their assumption that all businessmen are crooks was confirmed.

Stories about VAT evasion were first broken a few months ago. The Finance Ministry refused to provide details of the investigation but lists circulated through blog sites. The companies involved have officially been made public now, thanks to an application by Tara Nath Dahal of Freedom Forum that fights for right to information.

While this decision was a test case for right to information, the companies whose names were disclosed lost their right to confidentiality and were immediately presumed guilty in a collective trial by media. When the companies were made public, the status of individual cases were not considered. Some of the cases are still under investigation, some are fighting their cases at the Revenue Tribunal, and others are just under suspicion.

In many of the 385 firms listed for faking VAT bills, the users of those companies have been held responsible. However, the names were reported in the media like all of the companies were already guilty of the charge. The list included leading companies of the country, also the biggest employers and tax payers.

It could be many of them are indeed guilty, but we don't know until they are proven to have committed a crime in a court of law. That is what the rule of law means. A breakdown of the judicial system means that anyone can be framed by a business rival, and the person is jailed until innocence is proven. Prime Minsiter Baburam Bhattarai signed the BIPPA agreement with India, but potential investors in Nepal are also looking at our legal practices, and what they see doesn't inspire much confidence.

Whether they are taxpayers or tax evaders is not for the public or the media to decide. Unless these companies had a legal stamp on them for their irregularities, their names should have been kept confidential.

Flashing the names will only make the investigation more difficult now. Companies that were cooperating during the investigation in order to save their face, now have less to lose. The investigating officers may have a difficult time gaining their trust. The anonymity of cyberspace provides the cloak for anyone to make any accusation against anyone, there is no legal recourse. Tarring all businesses (the honest ones as well as the crooks) with the same brush and presuming they are guilty until proven innocent goes against law, it is not justice.

Since fake VAT bills leave a paper trail, it should not be difficult to separate the wheat from the chaff. There are institutions charged with conducting such investigations, the business have the recourse to appeal. That is how the law works. The way it is going, small firms willing to mend their ways might have a difficult time even coming up with the penalty.

Tax investigation is nothing new, it is common all over the world. But nowhere in the world are "suspects" labeled "guilty". Such early disclosure is likely to discourage new investment and will negatively impact on businesses that have built their reputation on integrity.

The investigation will take its course and hopefully identify the real counterfeiters and evaders. It is then that we should use our right to information and ensure that the guilty are punished with the full force of the law. But right now, I'd rather demand a mechanism to check if the VAT bill I have in my hand is authentic.

Read also:
The right to know, RUBEENA MAHATO
Transparency is the biggest safeguard of democracy

1. asdf
Anyone worried about the inflationary impact that this VAT scam might bring in? It is through VAT evasion that makes most goods affordable. The real estate market is about to collapse, the downward spiral of the stock market, Banks failing (or even possible mergers), possible provisioning by the banks (if the scene gets worse), the unproductive or rather the inability of our industries to produce anything worthy of export. 

Our culture is such that we have to haggle and negotiate anything we buy. The printed prices be damned. Where are the operating margins, dear?
Ask yourself one honest question, be real honest, "Would you rather pay more and make sure that the VAT is paid or would you rather give a rats @r$e about the VAT and purchase the cheaper good?" You decide!

2. Independent Observer
What about all those electronic gadget shops in New Road that never provide VAT bills? And if asked, they will charge you extra 13% to be eligible for VAT Bills, so a lot of people just buy without any proof of purchase. And a lot of shops keep on changing their names every few months. Next is the Party Palaces. They too keep changing their names. They are definitely cooking something.

3. Yamaraj
Some of those on the list of fake VAT bills may be cheats, but there is a tendency here to say all businessmen are thieves. When revenue officials make it impossible for traders to be honest, it's all relative. Even the list is a way to extort money from legitimate businesses.

4. Mia
The very fact that so many businesses are evading this tax should tell the government that they need to come up with better tax and regulation policies that will ensure that the businesses pay their taxes because the policy is fair.

And true, businesses may as well not cooperate since they've already been labeled guilty. I've seen enough of these "flashing" scandals on the news but very rarely of how these business are held accountable. There is no rule of law when it comes to actual accountability. 

I supposed this "right to know" doctrine is a convenient way for the news media to make headlines...but they do a terrible job of following up on "what's next".

5. anarchy
BTW, why are you defending all these crooked business houses? We the taxpayers have a full right to know who's evading the taxes. The culprits should be brought to justice. I challenge to Government to grow some balls & get these roaches inside bars. OOPS! There's no rule of law in our country!! & wait the government bureaucrats get some ransom to protect 'em.  

(11 JAN 2013 - 17 JAN 2013)