•   Sunday, 23 Jun, 2024

Axiata’s Ncell exit smacks of intention to evade capital gains tax

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KATHMANDU, Dec 4: Axiata has carried out opaque transactions while selling the 80 percent stake it owned in Ncell. The shares were sold at a low price with the aim of evading taxes without informing the regulatory authorities of Nepal. Stakeholders have said that there was an attempt to evade capital gains tax in the purchase and sale of Ncell in 2016, and even now they are trying to evade revenue by buying and selling shares in an opaque manner.

Foreign investor Axiata has sold its shares for Rs 6.65 billion. Axiata sold 80 percent of its holdings to Spectrolite UK. Reynolds Holding Limited, owned by the Axiata Group, has been bought by Spectrolite UK Limited. A company registered two months ago has bought 80 percent of the shares of Reynolds Holding Limited in Saint Kitts and Nevis, Asia. The British company, which opened at one US dollar, was sold to Spectrolite UK Limited for US$ 50 million.

In 2016, Axiata bought 80 percent of Reynolds Holding's shares in Ncell for Rs 143 billion. After seven years, the selling of the same shares for just 4.65 percent of the purchase price, i.e. 95.35 percent less than the sale price, shows a clear intention to evade tax.

A senior official of Nepal Telecommunication Authority (NTA) said that the transaction was conducted with the aim of tax evasion. "Even if the IPO was issued, they could have raised their investment," said the official, "Even in broad terms; the company cannot be sold at such a low price." The official said that not informing the NTA was not a good intention, either.

In 2016, Axiata bought 80 percent of Reynolds Holding's shares in Ncell for Rs 143 billion.

Anand Raj Khanal, the former senior director of Nepal Telecommunications Authority, said that Axiata has the intention of harming the tax revenue of the Nepal government in a roundabout way. Khanal said Axiata seems to have sold shares at unnatural prices and according to a grand design. "There is a lot of suspicion that an organization that is making a profit of USD 6.61 billion in one year sold its shares for USD 50 million out of self-interest," he said, “It seems that Ncell Axiata has sold shares at a much lower price than the actual price."

Khanal said that Ncell Axiata is a registered company in Nepal and it should follow the laws of Nepal. Former senior director Khanal claimed that Ncell did not complete the various procedures for determining the tax. He said that Ncell Axiata will not have an easy environment in the future as Nepal Rastra Bank’s pre-approval is mandatory for sending the dividends it has earned to the UK. He said that if the company does not follow the law, the company's license may be revoked. Ncell Axiata has easily sold shares to foreign companies. He argued that it will not be easy to take the profit accordingly.

Rule 15 (K) of the Telecommunications Regulations 2054 stipulates that before buying or selling shares of more than 5 percent of the paid-up capital, the approval of the authority must be obtained. But Ncell Axiata violated the provision and sold shares in foreign lands. 

After a court order for tax evasion in 2016 transactions, Ncell had to pay around Rs 62 billion in capital gains tax, penalties and interest. Even when TeliaSonera sold Ncell to Axiata in 2016, the transaction was conducted abroad to evade capital gains tax. 

The tax was paid only after the case reached the Supreme Court through various agencies and the Supreme Court ordered that the tax be paid.

Shares have been bought and sold without even giving a slight hint to the regulatory body, NTA. The price at which it is being bought and sold now is unbelievable. Purushottam Khanal, chairman of Nepal Telecommunication Authority, said that he has requested formal information about Ncell's share buying and selling. 'The authority has not received formal information,” Khanal said, “We have issued a correspondence to make transactions only with permission.” He said that even if there is a sale, the tax will be determined by DDA according to the law. Rule 15 (K) of the Telecommunications Regulations 2054 stipulates that before buying or selling shares of more than 5 percent of the paid-up capital, the approval of the authority must be obtained. But Ncell Axiata violated the provision and sold shares in foreign lands. 

Satish Lal Acharya, the investor of the company Spectrolite UK, is buying the shares. He is a businessman of Nepali origin based in Singapore.

A former-secretary of the Government of Nepal charges that Ncell Axiata has been selling shares abroad without informing the regulatory bodies of Nepal in order to evade the capital gains tax. 

"The inner intention of Ncell Axiata, which has come under direct foreign investment, to sell its shares without informing the regulatory body of Nepal is to avoid paying capital gains tax on the sale," said the former secretary, "It seems that Nepal will lose a lot of revenue from this decision." 

Ncell issued a press release last Friday stating that Spectrolite is committed to expanding Ncell's range of services, enhancing quality and driving Ncell forward with digital innovations. Satish Lal Acharya, the investor of the company Spectrolite UK, is currently buying the shares. He is a businessman of Nepali origin based in Singapore.

“Spectrolite is very pleased to announce this agreement for its shareholding in Ncell. With my extensive experience in the telecommunication sector, in collaboration with Ncell management, we are committed to provide various sophisticated services to millions of customers in Nepal with innovation and investment," Acharya said, “We are looking forward to moving forward as a Nepali company.”

“In the coming days, the company will be announcing enhanced plans to expand its range of services, which will make the company a leading digital service provider and data services platform,” Chief Executive Officer and Managing Director of Ncell Jabbor Kayumov said.

 


Source: myRepublica
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