Suraj Thapa (name changed) of Kalimati sold three ropanis of land for Rs 15 million, but he paid taxes on only Rs 5 million. The Department of Revenue Investigation (DRI) launched a probe into the transaction, and the case has now been transferred to the Department of Money Laundering Investigation (DoMLI). Meanwhile, the money Thapa received by selling his property has remained frozen for the last one and a half years.

Similarly, a Nepali living in Australia sold his property in Kathmandu for Rs 5 million one and a half years ago. However, the paperwork received from the Land Revenue Office shows that he has paid taxes on only Rs 2 million. The DoMLI has frozen his bank account where the money was deposited.

The DoMLI is now preparing to file a case against them under the Anti-Money Laundering Act. As per the act, the DoMLI can take them to court demanding confiscation of the transaction amount, an equal amount in fines and a four-year jail term.

“We have 10 such cases worth Rs 90 million under investigation,” said Rajendra Prasad Nepal, director general of the DoMLI. “People who try to evade taxes by undervaluing transactions on paper will have to face the consequences.”

Officials said the trend of paying less taxes by undervaluing property sales is widespread. They usually pay taxes at the minimum rate fixed by the government for land in a particular area which is very low compared to the market price.

“We cannot stop such practices until we instil fear in the people that the state will take action against them,” said Rohit Kumar Bhattarai, director at the Department of Land Reforms and Management. According to him, the tendency exists primarily to avoid paying taxes to the government.

“As the minimum price of land fixed by the government for certain areas is less than half of the market value, people tend to show their transactions at the government rate on paper,” he said. “This means that it is necessary to update the government rate as per the market rate.”

He added that the income source disclosure requirement for transactions above Rs 10 million may have prevented people from putting down the actual value. The government has made it mandatory to show the source of income when buying property worth more than Rs 10 million. The threshold was Rs 5 million earlier.

Land Revenue Offices are required to send details of suspicious transactions and those worth more than Rs 10 million to the Financial Information Unit (FIU) of Nepal Rastra Bank. The FIU studies the data and launches an initial probe into suspected cases of money laundering.

source:The Kathmandu Post,21 August 2012