The weakness of the regulators made the investors bleed millions today as the stock brokers halted the share trading to protest against the Inland Revenue Department's (IRD) directives to register themselves under value added tax (VAT) regime.
Both the regulator – front line regulator Nepal Stock Exchange (Nepse) and capital market regulator Securities Board of Nepal (Sebon) – remained mute spectator despite stock brokers' anti-market practice.
Stock Brokers Association of Nepal (Sban) claimed that the stock trading would not start until the regulator clarifies on the provision regarding the payment of VAT while making transactions in the securities market.
In its recent letter to two brokerage firms, the IRD had asked them to clear their VAT overdue of last four years following assessment of their tax liabilities, fine and accrued interest. The IRD recently carried out VAT assessment of two brokerage firms, determined the tax liabilities for them and ordered them to get registered for VAT. The stockbrokers have been given 15 days to comply.
Inland Revenue Office sent letters to Investment Management asking to clear dues of Rs15 million, and Sundhara Securities to file VAT amount of Rs 6 million. The tax offices are writing to other 48 stockbrokers soon.
President of the association Priya Raj Regmi said that brokerage firms had not so far collected VAT from clients therefore they could not file the overdue VAT as determined by the IRD. "We have been undergoing through full audit regularly," he said, adding that VAT has never been an issue so far. "Theoretically, it's the consumers who have to pay VAT. Yet, there is policy ambiguity and uncertainty over the VAT."
"Since the IRD has ordered only these two firms to get registered for VAT, they have to issue VAT bill for each transaction from tomorrow if there is trading," he added. "If they will issue VAT, what other brokerage firms are going to do? There is a lot of uncertainty and lack of policy clarity whether to issue VAT bill or not or who will have the liability for VAT. So brokers will not carry out trading until this policy uncertainty is addressed."
Issuing a statement today, the association said that the transactions were ‘automatically halted’ as there has been policy uncertainty and practical difficulty over the tax policy in the wake of taxpayer service offices' decision to determine VAT and instruction to register themselves for VAT.
Arguing that VAT is not its members’ liability, the association – of 58 brokerage firms – said trading of shares in the secondary market will be halted until the issue is resolved and the policy uncertainty over VAT is addressed.
Though the officials of Sebon and brokers' association sat for talks to find a way out to the dispute, the meeting ended inconclusively prompting the stock brokers to halt the share trading, which had left share investors disappointed.
The brokers halting the market went to the Nepse – the front line regulator – before 11:00 am, the opening time for the share market.
Past President of the association Narendra Raj Sijapati said they were compelled to halt the transactions as they were facing a dilemma on how to impose VAT on investors. "The law has not allowed us to issue the physical invoice," he said, adding that there is no system developed in the software to impose VAT amount from the investors.
The association has claimed that the government is yet to clarify on the payment of VAT for past business, which according to them is not acceptable for it. It also warned to halt transactions for an indefinite period, if the government did not roll back its plan.
However, the government has been doing homework since last year to bring stockbrokers in the tax net. However, it has failed after stockbrokers' protest.
The government is considering imposing 13 per cent VAT on the stockbrokers’ commission amount. However, the stockbrokers have been reluctant to implement government plan saying that it was inappropriate to charge VAT on the commission as they had to share certain portion of the commission with Nepse and Sebon.
The stockbrokers have been charging 0.35 per cent to 0.6 per cent commission from investors. "Out of the commission, stockbrokers have to pay 20 per cent to Nepse and 15 percent is deducted as Tax Deducted at Source (TDS). Likewise, stockbrokers need to pay 0.6 per cent of their commission amount annually to Sebon as levy charge.
If the government imposes VAT, the brokers will be compelled to pass on the VAT amount to their client, adding extra burden to the investors, according to the association.
Both the regulator – front line regulator Nepal Stock Exchange (Nepse) and capital market regulator Securities Board of Nepal (Sebon) – remained mute spectator despite stock brokers' anti-market practice.
Stock Brokers Association of Nepal (Sban) claimed that the stock trading would not start until the regulator clarifies on the provision regarding the payment of VAT while making transactions in the securities market.
In its recent letter to two brokerage firms, the IRD had asked them to clear their VAT overdue of last four years following assessment of their tax liabilities, fine and accrued interest. The IRD recently carried out VAT assessment of two brokerage firms, determined the tax liabilities for them and ordered them to get registered for VAT. The stockbrokers have been given 15 days to comply.
Inland Revenue Office sent letters to Investment Management asking to clear dues of Rs15 million, and Sundhara Securities to file VAT amount of Rs 6 million. The tax offices are writing to other 48 stockbrokers soon.
President of the association Priya Raj Regmi said that brokerage firms had not so far collected VAT from clients therefore they could not file the overdue VAT as determined by the IRD. "We have been undergoing through full audit regularly," he said, adding that VAT has never been an issue so far. "Theoretically, it's the consumers who have to pay VAT. Yet, there is policy ambiguity and uncertainty over the VAT."
"Since the IRD has ordered only these two firms to get registered for VAT, they have to issue VAT bill for each transaction from tomorrow if there is trading," he added. "If they will issue VAT, what other brokerage firms are going to do? There is a lot of uncertainty and lack of policy clarity whether to issue VAT bill or not or who will have the liability for VAT. So brokers will not carry out trading until this policy uncertainty is addressed."
Issuing a statement today, the association said that the transactions were ‘automatically halted’ as there has been policy uncertainty and practical difficulty over the tax policy in the wake of taxpayer service offices' decision to determine VAT and instruction to register themselves for VAT.
Arguing that VAT is not its members’ liability, the association – of 58 brokerage firms – said trading of shares in the secondary market will be halted until the issue is resolved and the policy uncertainty over VAT is addressed.
Though the officials of Sebon and brokers' association sat for talks to find a way out to the dispute, the meeting ended inconclusively prompting the stock brokers to halt the share trading, which had left share investors disappointed.
The brokers halting the market went to the Nepse – the front line regulator – before 11:00 am, the opening time for the share market.
Past President of the association Narendra Raj Sijapati said they were compelled to halt the transactions as they were facing a dilemma on how to impose VAT on investors. "The law has not allowed us to issue the physical invoice," he said, adding that there is no system developed in the software to impose VAT amount from the investors.
The association has claimed that the government is yet to clarify on the payment of VAT for past business, which according to them is not acceptable for it. It also warned to halt transactions for an indefinite period, if the government did not roll back its plan.
However, the government has been doing homework since last year to bring stockbrokers in the tax net. However, it has failed after stockbrokers' protest.
The government is considering imposing 13 per cent VAT on the stockbrokers’ commission amount. However, the stockbrokers have been reluctant to implement government plan saying that it was inappropriate to charge VAT on the commission as they had to share certain portion of the commission with Nepse and Sebon.
The stockbrokers have been charging 0.35 per cent to 0.6 per cent commission from investors. "Out of the commission, stockbrokers have to pay 20 per cent to Nepse and 15 percent is deducted as Tax Deducted at Source (TDS). Likewise, stockbrokers need to pay 0.6 per cent of their commission amount annually to Sebon as levy charge.
If the government imposes VAT, the brokers will be compelled to pass on the VAT amount to their client, adding extra burden to the investors, according to the association.
No comments:
Post a Comment