Delegation Meeting with the Inland Revenue Department Officials
NGO Federation of Nepal (NFN) organized a delegation meeting with senior officials of the Inland Revenue Department (IRD) this week, dated 13th March 2018, Tuesday.
NFN team headed by President Mr. Gopal Lamsal, accompanied by other members namely Mr. Jitram Lama – Treasurer, Ms. Bhawana Bhatta – Central Committee Member, Mr. Dillu Prasad Ghimire – Central Committee Member, Mr. Khim Bahadur Shahi – Member Secretary, NFN Karnali Province, Mr. Hast Bahadur Sunar – Programme Coordinator, and Mr. Anil Upadhyay – Information, Communication and Documentation Officer visited the latter's office to discuss on the policies and practical issues related to the Tax/VAT system affecting CSOs in the country. The members joining the meeting on behalf of the IRD were Mr. Kishor Jung Karki – Director General, Mr. Yagya Prasad Dhungel – Deputy Director General, and Mr. Shankar Prasad Kharel – Depurty Director General, Policy Analysis and Management Division.
Since NFN received quite a number of complaints regarding fines, technical difficulties, renewal of the tax exemption certificate, forms and formats, and other problems concerning Tax/VAT policies and practices imposed by the IRD officials from its members across the country, this delegation meeting was planned and organized in a short notice. The idea therefore was to figure out and come up with the new avenues for collaborations between the IRD and NFN to address the problems experienced by CSOs.
In the same vein, NFN delegates informed about each and every nuance of the difficulties being encountered by CSOs and made the IRD authorities realize that some of the issues shared were very pertinent and needed to be addressed at the level of IRD. Whilst some other issues related to the policy reformation were asked to be duly conveyed to the line ministries and other appropriate designates of the Government of Nepal on behalf of Nepalese CSOs. In the mean time, the delegation team also handed over a 5-point memorandum to the authorities of which the discussion was held in practical ways. Moreover, the discussion being a two-way process was a good opportunity to get to know about each other's concerns, arguments and gaps in ways of understanding and practising the laws related to the Tax/VAT system of the land.
The meeting continued one and half hours and was adjourned around 05:00 PM. To the team, the meeting was fruitful in the sense that the issues of CSOs have been well communicated, certain kind of understanding has been developed between the parties, and more so the gaps have been narrowed down. Some of the core understandings built out of the meeting included the following:
- It's the choice of NGOs to get registered into VAT system. Even though, principally they may not require doing so. It depends, which type of work NGOs do – for matters related to the Tax or VAT payment. In many cases non-for-profit NGOs have got registered into the VAT system being ignorant of the importance.
- The tax officers of different parts of the country do have differential treatments to CSOs regarding their Tax or VAT obligations. There are no uniform practices.
- Some forms and formats endorsed by the IRD are defective in the sense that they do not contain enough space (columns) for not-for-profit CSOs allowing them to record their VAT entries.
- For clarity, it was reinforced by the IRD officials that tax exemption doesn't mean the exemption of tax in all kinds of incomes. It is merely in the donations and therefore NGOs have to pay Tax or VAT in other kind of income headings as per the existing law of land.
- NGOs were suggested to record the incomes and expenditures made out of the contracts with the donors appropriately so that they could avoid unnecessary tax burdens to them.
- The officials informed that wrong entries can be corrected but not the audited financial details that are duly undersigned by the NGOs' authorities.
- As a consequence of lacunas mentioned above, NGOs had to suffer in the process of renewal of their tax exemption certificates. It's not just because of one reason but owing to several other reasons cumulated. There are both policy and practice-related hurdles.
Further, the duo sides pointed out some actions to be taken to address the challenges experienced by CSOs. The list includes the following:
- NFN needs to widely train and capacitate its members regarding the Tax/VAT system.
- The IRD should send circulars across, and train its officers all over the country on issues and concerns of CSOs, and policies governing taxation of not-for-profit organizations for uniformity and common practices.
- For policy issues to be reformed, NFN requires to lobby and advocate at the ministerial and political levels. The IRD being a technical body cannot do much on the policy part.
- The Government's Public Procurement Policy should be revisited to make it CSOs-friendly from the perspective of Tax and VAT. For this as well, strong and persistent advocacy efforts are required to be taken. However, the VAT policies need to be amended based on the categorization of NGOs.
- The IRD needs to redesign its forms and formats to make them NGOs-friendly.
Both the parties realized that this particular period of time being of the policy transition, the policy matters related to CSOs Tax and VAT concerns should be widely discussed, rethought and revisited realistically and appropriately. They agreed that the practical difficulties can be sorted out through dialogues as far as the existing policies allow them doing so.