Controversial Income Tax Law Amendment: Manipulation to Legalize Illegal Property – myRepublica
KATMANDU, September 19: The government, which is criticized for its controversial decision to grant tax exemptions to certain companies, has taken another controversial decision to amend the Income Tax Act so as not to seek the source of income for investment. With the aim of legalizing money illegally earned by senior political leaders, businessmen and corrupt employees, the Income Tax Law is being amended by inserting the provision that “the source of income will not be sought for the investment ”.
Finance Minister Janardan Sharma amended the “Income Tax Act, 2002” through the financial ordinance tabled in parliament. The ordinance specifies that the source of income will not be sought in investments made in sectors other than tobacco and alcohol. The law is being amended so that no one has to disclose the source of their income when investing in industries with infrastructure, with the exception of certain industries.
The amendment to Article 11 of the Income Tax Act 2002, which was tabled in the House of Representatives, states that the source of income will not be sought for investments made before mid-April 2024, except for the sectors dealing with cigarettes, cigars, tobacco, betel leaf and spices. In the past, too, the provision not to seek sources of investment has been introduced on several occasions.
In Budget 2018, a provision was made not to seek sources of investment. After many protests, it was quickly suppressed by the Ministry of Finance. Financial sector experts claim that the provision of not seeking the source of income in the investment will pave the way for money laundering as it will give legitimacy to illegally acquired properties in the country.
If the system of not looking for sources of investment is put in place, not only will the black money hidden in the country gain legitimacy, but the country will be in trouble internationally. Nepal is affiliated with international organizations that discourage investment in money laundering and terrorist activities. Nepal is a member of the Financial Action Task Force (FATF) and the Asia Pacific Group (APG).
Under the leadership of these two organizations, efforts have been made to deter money laundering and sponsor terrorist activity around the world. Nepal is a member of these organizations. These memberships are not yet mature and are in the evaluation phase.
These organizations accuse Nepal of failing to enact the necessary laws to combat money laundering and investment in terrorist activities, and of taking action against those who acquire illegal assets. There is a fear that if Nepal does not do as it says, membership will be revoked and the country will be blacklisted.