Kathmandu: In Nepal’s parliamentary tradition, the Finance Bill, the legal backbone of the national budget, is rarely altered once it is formally tabled.
However, former Finance Minister Barshaman Pun holds a unique place in history as the only minister whose Finance Bill underwent a significant amendment before final passage.
This unprecedented event was largely triggered by an investigative exposé from Clickmandu. Under the headline “In whose interest did Minister Pun tamper with Section 57, causing billions in losses to the state?”, the report questioned the motives behind a controversial change to the Income Tax Act, eventually sparking a national debate that contributed to a shift in the ruling coalition.
The controversy centred on a proposal by Minister Pun to add a restrictive clause to Section 57 of the Income Tax Act of 2002. Under the existing law, any change in ownership of 50 percent or more within three years was treated as a “disposal” of assets, requiring the company to pay a 25 percent income tax on the gains.
Pun’s proposed amendment suggested that as long as the number of shares held by existing partners remained the same, the addition of new shareholders through a capital increase would not be considered a change in ownership. This move was widely criticized as a “loophole” designed to allow corporate giants like Ncell and various hydropower projects to evade billions of rupees in taxes by simply issuing new shares rather than selling existing ones.
The report led to fierce opposition within the House of Representatives. Prominent lawmakers from the then-ruling Nepali Congress, including former Finance Minister Dr Prakash Sharan Mahat, Arzu Rana, and others, filed formal amendments to correct the provision. Dr Mahat warned the parliament that the state stood to lose astronomical amounts of revenue to the benefit of specific large corporations. Despite these warnings and heated debates, the then-coalition of the Maoist Centre and Nepali Congress used their majority strength to pass the bill in its original form on June 30, 2024.
However, the political landscape shifted immediately after the bill left the lower house. The existing power equation collapsed as the Maoists exited the government and the CPN-UML joined a new alliance led by K.P. Sharma Oli. With the change in government, the battle moved to the National Assembly, where CPN-UML lawmaker Bhagwati Neupane filed an amendment to scrap the controversial provision. By then, Bishnu Paudel had taken over as Finance Minister. Recognizing the public and political pressure, Paudel accepted the amendment but narrowed its scope, proposing that the tax exemption should only benefit startups, private equity, and venture capital firms rather than established large-scale industries.
This revised version was passed by the National Assembly and sent back to the House of Representatives. Given the new ruling alliance, the lower house formally adopted the upper house’s changes, ensuring that large companies would still be liable for taxes under the old rules if their ownership shifted through capital expansion. The amended Finance Act finally came into effect on July 16, 2024.
This case remains a landmark in Nepal’s parliamentary history, representing the first and only time a Finance Bill was successfully amended during the legislative process due to the combined influence of investigative journalism and shifting political dynamics.
Comment Here