Finance minister in dock again ‘for using outsiders’ to tweak taxes

Finance minister in dock again ‘for using outsiders’ to tweak taxes

Finance Minister Janardan Sharma who has been in the news for the last few months for all the wrong reasons has once again come in the eye of the storm.

On Monday, the Finance Ministry scrambled to rebut charges that Sharma had “involved” two outsiders to change some taxes just before he presented the budget in Parliament on May 29.

Annapurna Post, a vernacular daily published from Kathmandu, in its Monday’s edition made a damning allegation that Sharma instructed four senior Finance Ministry officials to follow the suggestions of two individuals—a retired senior non-gazetted officer and a chartered accountant—on the night of May 28 and make some last moment changes in taxation with a view to benefiting some business groups and harming others.

The issue of Finance Minister Janardan Sharma allegedly involving outside elements to change tax rates on the eve of the budget presentation for the next fiscal year 2022-23, has drawn questions and criticism in Parliament.

Monday’s Parliament meeting saw some lawmakers demanding clarification from Sharma and investigation into the matter.

As reported by the Annapurna Post on Monday, Finance Minister Sharma had instructed senior officials of the Finance Ministry to include tax rates suggested by two outsiders in the night ahead of the budget presentation day on May 29.

Lawmakers from the main opposition CPN-UML vehemently demanded that Minister Sharma give answers in parliament on the allegations and investigation into the matter.

Yogesh Bhattarai, a lawmaker from the main opposition party, said the finance minister should offer clarification on the report about “the involvement of outside elements” in budget-making.

“The minister invited some outsiders to the Finance Ministry. He introduced them to senior officials of the ministry including the finance secretary, revenue secretary and chief of the budget division. Then he (the minister) told high-level officials of the ministry that those people would change tax rates on his behalf, and tax rates were changed accordingly. Now we demand answers from the Finance Minister on what was he trying to do?” Bhattarai said at Monday’s Parliament meeting.

The minister had earlier taken an oath of secrecy but he has undermined the oath by allowing outsiders to the Ministry’s budget section, said Bhattarai. “This is a betrayal of the country and the people.”

He also sought answers from the prime minister and the ruling parties on the matter.

Another UML lawmaker Mahesh Basnet said they heard that the Finance Minister changed tax and customs rates to help certain businesses in exchange for kickbacks.

“This must be investigated,” he said.

According to the report, Raghunath Ghimire, a former non-gazetted officer of the government and a chartered accountant, changed the tax rates in the night before the budget presentation day, although the finance ministry officials had already finalized the rates.

Ghimire who joined the government service as a secretary of a village development committee in Nuwakot in May 1996 was transferred to a tax office in Kathmandu just after eight months of serving as secretary.

After serving in several revenue-related offices, he resigned on February 13, 2019 as a senior non-gazetted officer at the Department of Customs.

A senior official at the customs department who had worked with Ghimire in the past told the Post that Ghimire was involved in a trade union associated with the Nepali Congress.

A senior official at the Finance Ministry denied any involvement of outsiders in the budget formulation process but said a Finance Ministry team and experts assigned by the Finance Minister are involved in the process.

“It is natural for the minister to have his own team to help him prepare the budget. But I didn’t know the names of any individuals who came from outside as there were many people involved in the process,” said the official.

Amid controversy, the Finance Ministry in a press statement denied involvement of unauthorized persons in the budget-making process.

“On May 28, preparations for appropriations bill, finance bill, bill on raising national debt, and bill on debt and securities, were made with the participation of the finance secretary, revenue secretary, departmental chiefs and director general of the Department of Customs, and the Inland Revenue Department, under the leadership of the finance minister,” reads the press statement. “There was no involvement of any other person except the authorized persons in this process.”

It is not the first time that Finance Minister Sharma has been embroiled in controversy over fixing of tax rates to benefit certain business groups.

In December last year, Kantipur, the Post’s sister paper, reported that Sharma changed the Finance Act for the current fiscal year 2021-22 to benefit certain iron and steel manufacturers while harming others.

For example, he reduced customs duty on the import of sponge iron but left the duty unchanged for billet, which is used to produce iron and steel, and hiked excise duty on the import of billet, to benefit some particular companies.

Likewise, the report also pointed out the tax exemption made by Sharma for motorcycle assembly plants and customs duty reduction on the import of vehicles for under-construction large hotels, to benefit certain business groups. Likewise, the provision in the Finance Act that investment could be made without disclosing the sources of income also invited controversy.

A few months ago Finance Minister Sharma had pressured Nepal Rastra Bank to release around suspicious funds totaling Rs400 million remitted from the US.

After the Financial Crime Enforcement Network, a US government agency working against money laundering and terrorist financing, asked the Nepali authorities to seize the amount brought by Prithvi Bahadur Shah, a resident of Achham and return the money back to the US, the central bank had frozen the money parked in his and his family’s names.

After the issue came to light, Sharma moved ahead to remove Nepal Rastra Bank Governor Maha Prasad Adhikari on the charge of “leaking sensitive information and not fulfilling his responsibilities effectively.”

Based on the recommendation of Minister Sharma, the cabinet formed a probe committee with representation of Sharma’s loyalists, leading to automatic suspension of Adhikari as governor as per the Nepal Rastra Bank Act 2002. The Supreme Court, however, later stayed the decision and Adhikari returned to his duty.

Following the court order that restored Adhikari as governor, suggestions were made that Sharma should resign on moral grounds.

Sharma has faced criticism also for failing to tackle the economic crisis the country is facing.

He has drawn flak from economists and experts also for bringing a bloated budget without proper resources for financing the needs and failing to come up with any specific measures to address the country’s economic woes.

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