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The government on Thursday formed a high-level probe panel under former auditor-general Tanka Mani Sharma to investigate the suspicious Ncell share purchase deal. 

Phanindra Gautam, Baburam Bhandari, Hrydesh Shakya and Sujan Kumar Kafle are members of the panel. According to government spokesperson and Minister for Communication and Information Technology Rekha Sharma, the panel has been instructed to submit its report within a month after a thorough study of the matter. 

Amid reports about the controversial transaction came to the fore, the finance committee of the parliament on Wednesday urged the government to take measures to intervene in the ongoing share purchase deal. The government’s decision follows a series of meetings among the top leaders of the ruling coalition.  

Meanwhile, Ncell has said that the pricing and structure of the transaction was determined through a willing buyer and seller basis. As per the agreed deal structure, Axiata is set to receive a base payment, along with additional benefits in the form of profit-sharing for the next five years, extending until 2029, Ncell said in a statement.

Meanwhile, Appellate Court Patan has issued an interim order to halt the purchase of Ncell shares. A single bench of justice Purushttom Dhakal has also instructed the government to submit all details, including the shared details.

Kathmandu: The Finance Committee of parliament on Wednesday directed the Nepal Telecommunications Authority (NTA) to submit the details with factual information within 15 days on the issues relating to sale of Ncell shares.

The committee had invited NTA chair Purushottam Khanal to enquire about the issue.  After the discussion, the committee chair, Santosh Chalise, informed  that they asked the NTA to submit the details about the sale and purchase of Ncell shares in writing within two weeks.

NTA chief Khanal told the House committee that a letter was received from the Ncell Axiata Limited, stating that it would provide the details of sale and purchase of Ncell share soon as it was collecting documents in this regard.  On Dec 1, the NTA had written to Ncell, seeking details of the sale and purchase of its shares. The letter was sent in response to reports about Axiata exiting Ncell by selling its majority stakes. 

“The process of collecting related documents is underway and it would be submitted to the respective body within the existing laws of Nepal", Khanal informed the committee. NTA has said it will launch further investigations if the sale and purchase of Ncell stakes is suspicious. The House panel has also sought response from NTA about the arrears of over Rs 2.2bn, which has to be recovered within three months from nine telecommunication service providers. 

Lawmaker from the Rastriya Swatantra Party Swarnim Wagle demanded that Ncell management be brought before the finance committee for a further inquiry.  "The finance committee should write to the chief executive officer of Ncell Axiata Limited and its partner in Nepal inquiring about the matter,” he said. “A foreign company is exiting Nepal at a time when we are talking about organizing an investment conference in the country.” Wagle expressed concern that the case could send a negative message to foreign investors aspiring to invest in Nepal.

CPN (Maoist Centre) spokesperson and former Speaker Agni Sapkota on Wednesday said the government had no weakness in the sale of Ncell stakes. Speaking at an interaction organised here by the Rafat Sanchar Club, the leader said the powerful probe committee should not shy away from taking action in the case if proved guilty. 

Stating that the government is not guilty in the case of Ncell share sales, he said if anyone is found culpable, the guilty party should be booked. 

"Problems have surfaced without the help of stakeholders in the initiatives taken by Prime Minister Pushpa Kamal Dahal. 

The whole Council of Ministers could not be mobilised to realise the aspirations of the people for development. Prime Minister tried to do many works. But there was no support from the Council of Ministers. On the other hand, government employees are also not cooperating, resulting in the difficulties the government is facing to deliver," he said. 

Stating that Prime Minister single-handedly undertook the initiative for rescue efforts and relief distribution to the earthquake victims, the leader said there was however reports of death of some victims for want of relief due to non-cooperation of the respective sectors. 

Welcoming the government decision to involve the Nepali Army in the relief distribution efforts, he advised the government to address citizen's concerns and criticism regarding its performance. 

"There is no issue in the ruling coalition and it will last for five years," he claimed, adding that it is essential to maintain public trust and uphold hope in the alliance. 

Stating that the government secured achievements in Lalita Niwas land scam, gold smuggling and the fake Bhutanese refugee, he said the Prime Minister's foreign visits have contributed to strengthening the country's diplomatic ties on the global stage. 

He advised the political parties to consolidate intra-party democracy to promote the overall national democracy. 

As he commented, the parliament the venue of amplifying the voice of the citizens has seemed confused. "The Parliament failed to prove it lively and pro-people. None is above the parliament.  The passages of the bills have been hampered.  The parliament should reflect parliamentary practices."

Tax collection was encouraging in the past two decades after the government adopted the Tax Reforms Policy in the 1990s.  In recent years, however, revenue has consistently fallen short of the set targets. Deviations in tax administration, economic sector challenges, and changes in the leadership of revenue administration are some of the factors that have contributed to the decline in tax collection.

According to the Financial Comptroller General's Office, the government has only achieved 22 percent progress in revenue mobilization in the first five and a half months of the current fiscal year. The government has set a target to raise Rs 1,472bn in the fiscal year 2023/24. The slow pace of revenue collection indicates that the government is likely to miss its targets for the current fiscal year. In the fiscal year 2022/23, the government achieved only 68.21 percent progress in revenue collection, raising only Rs 957bn out of the targeted Rs 1,403bn. This is the lowest collection in the past five years in terms of revenue targets.

In previous years, the government consistently raised revenue equivalent to 20 percent of its GDP. This rate, however, plummeted drastically in the previous fiscal year.

The Covid-19 pandemic, coupled with import restrictions and the Ukraine war, significantly slowed revenue growth. As a result, revenue collection is now well below the level of recurrent expenditure. This has had adverse effects on revenue and resulted in excessive dependence on imports. Economist Dr. Dilliraj Khanal commented that there has been a lack of concrete efforts to control recurrent expenses or expand the revenue base.

 "Apart from some initiatives to bring about changes in tax policy at the global level, no such measures have been taken in Nepal so far," he said. Dr. Khanal added that the tax revisions in the current budget have given negative protection to vital industries. “As a result, it is estimated that there has been some impact on the revenue.” 

In 2021, the World Bank said that Nepal had the highest tax-to-GDP ratio in South Asia. During the year, Nepal’s tax-to-GDP ratio was 17.5 percent, compared to 13 percent of Bhutan, 12 percent of  India, 9.1 percent each of the Maldives and Pakistan, and 7.6 percent of Bangladesh—the lowest in South Asia.

The tax-to-GDP ratio reflects a country's ability to provide public services, infrastructure, and meet mandatory obligations. A high tax-to-GDP ratio indicates a heavier burden on taxpayers and suggests adequate public infrastructure in the country. Tax-to-GDP ratio is lower in countries relying on their own income.

In its recent Nepal Development Update, the World Bank has proposed various measures to increase revenue in Nepal. These measures include expanding the scope of taxation, plugging loopholes, and reducing special exemptions and concessional rates of existing taxes. The World Bank also recommended prioritizing businesses in the formal sector, stating that revenue is adversely affected by large informal economies.

During a panel discussion organized during the launch of the update, Dr. Ramesh Chandra Paudel, a member of the National Planning Commission, highlighted that Nepal has failed to align its school education with productivity. He emphasized the need to remodel the education system, giving emphasis to technical and vocational education, stating, "We are preparing manpower only for Europe and the Gulf countries."

The impact of structural changes in the global tax system has also affected Nepal's revenue system, as outlined in a report submitted by the Revenue Advisory Committee last year. According to the report, there is a gradual shift from tax revenue based on imports to internal revenue. The share of customs duty in total revenue was 31 percent in the fiscal year 2002/03, but it declined to 23 percent in the fiscal year 2020/21. In the fiscal year 2020/21, income tax, customs duty, and excise duty have emerged as the primary sources of revenue after VAT, the report states.

While Value Added Tax (VAT) has become the largest source of revenue, its share in total revenue has not experienced a significant increase. Following the implementation of federalism in Nepal, the collection of vehicle tax, real estate registration tax, and house rent tax has been decentralized to subnational governments. This has also brought some changes in the overall tax structure.

The committee also recommended the introduction of a revenue policy so that Nepal, an import-oriented and revenue-dependent economy, can promote domestic industry, ensure productive investment, and encourage exports.

Economist Dr. Khanal  said major reforms are needed in the tax system to concurrently mobilize resources at all three levels and address the expanding resource gap. He argued that such reforms would broaden the scope of taxation, curtail tax leakage and evasion, and augment the proportion of direct taxes, introducing progressivity to the tax system.

He further proposed the implementation of a nationwide equity funding formula explicitly designed to combat discrimination and fortify the equity dimension in development, presenting a viable option for enhancing resource allocation decisions. “The huge socio-economic development gap in the provinces also justifies the need for such a formula,” he added.

In 2015, the High-Level Tax System Review Commission underlined the need to modernize Nepal's taxation system, making it practical and aligned with international standards. Based on principles and international good practice, it suggested that the federal government collect customs duties, value-added tax, excise duty, corporate income tax, personal income tax, natural resource tax, social security tax, forest production fee, and carbon tax. It proposed granting provincial and local governments the authority to collect taxes under 29 different headings. The recommendations of the commission have yet to come into implementation.

The Asian Development Bank (ADB) has launched a new initiative to help assess and manage climate and disaster risks in the Hindu Kush Himalaya region, a critical water tower supporting the livelihoods of more than a billion people across Asia. 

Through technical assistance, ADB will undertake deep analysis of multi-hazard risks which include landslides, earthquakes, and floods—including from glacier lake outbursts—and vulnerabilities in Bhutan and Nepal, said ADB in a press statement.  This will help to strengthen the two governments’ capacities to conduct risk assessments in priority river basins. These assessments will be used to develop early warning systems and risk management options for future infrastructure development.

Home to the largest ice reserves outside of the polar regions, the Hindu Kush Himalayas feed 10 major rivers which sustain the livelihoods of 240 million people in the mountains and more than 1.6 billion people downstream, the statement says. 

The region is warming faster than the global average and if global temperature rises hit 3°C, 75% of glaciers in Bhutan and Nepal could melt by the end of this century. That would place unprecedented stress on access to water, threaten food and energy security, and result in significant biodiversity loss. 

“The roof of the world is melting,” said ADB President Masatsugu Asakawa. “The Hindu Kush Himalayan region is critical to the well-being and economic security of more than a billion people across our region. This initiative will help equip Bhutan and Nepal with essential information and enable them to invest in effective climate adaptation—which is now critical to managing climate risk.”

From 1985 to 2014, economic losses resulting from disasters in the Hindu Kush Himalayan region totaled $45 billion, much higher than those of any other mountain region. Since then, the increasing frequency and intensity of disaster events have pushed up economic losses and the number of people killed or displaced by such events.

“We must urgently ensure that finance is flowing into climate adaptation projects,” said ADB Principal Economist Declan Magee. “This requires high quality and dynamic assessments of climate and disaster risks that account for multiple hazards that can have impacts across borders.”

ADB’s assistance will help the governments, private sector, and local communities to understand the risks they face so they can decide on disaster risk reduction and adaptation measures, as well as risk transfer solutions including insurance. The technical assistance will set the stage for advancing knowledge across the Hindu Kush Himalaya region on climate resilient investment planning, development, and risk management. 

As Asia and the Pacific’s climate bank, ADB aims to provide $100 billion in climate financing from its own resources from 2019 to 2030, including $34 billion for adaptation. In 2022, ADB committed $7.1 billion of climate finance, including $4.3 billion for mitigation and $2.8 billion for adaptation. The bank mobilized an additional $548 million in climate finance from the private sector last year.