NCell’s Sudden Sale

Stop Corporates From Bending Laws

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The sudden sale of NCell, a prominent private-sector telecommunications company, has recently dominated the national media. According to sources, Axiata, the Malaysian conglomerate that owns NCell, sold a major percentage of the company's shares to a Nepali entrepreneur based in Singapore purportedly at a ‘dirt-cheap rate.’ This development has sparked significant curiosity and worry across the country.

Many have speculated that Axiata's plan to divest its shares is an attempt to avoid paying the compulsory capital gains tax to the government, which would be higher if the firm were sold at its true market worth. Furthermore, there are allegations that the company's sale, valued at approximately 26 billion rupees, was purposefully undervalued at 5 billion rupees in order to circumvent existing laws mandating the transfer of company ownership to the government after the completion of its 25-year licence period. Notably, if a company is sold to a Nepali entity before the end of its licencing period, it is exempted from government acquisition.

Reservations

Following the sale's disclosure in the Nepali media, various leaders, including Dr. Babu Ram Bhattarai and Gagan Thapa, expressed reservations about the transaction. Swarnim Wagle, an economist and the leader of the Rastriya Swatantra Party, accused Axiata of defiling Nepal's foreign investment climate after the company accused “Nepal’s tougher telecom regulations and tax regime’. The company's majority shares, held by Reynolds Holding, an offshore enterprise, were allegedly transferred to Spectrelite, controlled by Satish Lal Acharya, with the remaining 20 per cent owned by another company linked with Acharya's wife.

Because the private telecom operator is one of the highest tax-paying enterprises in the country, the sale has shocked the government as well as many Nepalis, prompting the government to form a panel to investigate the hushed sale, despite the buyer of the company stating that the purchase was done in accordance with national and international rules and that he is committed to abide by the law of the country. Following the disclosure of the abrupt sale, Axiata argued that present telecom rules are hostile to enterprises like NCell, which is based on foreign investment. As a result, it was forced to leave Nepal.

However, whatever explanations the seller and buyer of the private telecom operation give us, the attempt to sell the company to a Nepali entrepreneur at dirt cheap price has not gone down well in the country, as it reeks of dubiousness. Many feel that Acharya is really a 'front face' for Axiata, which maintains influence over the country through its foreign-based ventures. Acharya is the same individual whose smart phone company was seized by the government a few years ago after the company failed to file a massive amount of tax returns with the government. NCell has courted controversy since its arrival in Nepal with the primary goal of making money. It became lucky in the past after a body waived roughly 21 billion rupees in tax on it. Many tax department employees, who waived the tax, are now in prison for the crime they committed. Tax evasion and wilful failure to file tax returns are both punishable offences.

The move by NCell's parent business made us reconsider the numerous acts of corruption that have occurred in Nepal in recent years. Meanwhile, many believe that the sale of NCell's largest share amount at such a ridiculously low price could not have occurred without some form of collaboration among bureaucrats, political leaders, and the private corporation itself. The NCell owner is frequently accused of bribing leaders, officials, and lawyers to have tasks done in its favour. Furthermore, Axiata's sudden exit has sent a negative message that the investment climate in Nepal is unfavourable for foreign enterprises, which is untrue. The government must address this issue even if it needs to modify or consolidate current legislation, particularly tax regulations. Otherwise, corporations like Axiata may continue to engage in anomalies for their own gain.

Following the NCell's latest episode, our attention is drawn to myriad of other incidents, which indicates that occurrences of tax fraud and financial scams have been on the rise in recent years. Few people who commit such crimes face proper punishment. Several fraudsters and scammers frequently go unpunished as they are generally close to political leaders and top-ranking officials. Aside from high-level tax evasion, which frequently reduces government income collection, many incidences of financial fraud have occurred in the country. With the exception of a few instances, government officials have frequently demonstrated their unwillingness to accuse those engaged in such crimes. This failure, it is often charged, is mostly the result of a nexus between politicians, bureaucrats, and offenders. 

Unethical practice 

All forms of corruption, financial fraud, and tax evasion have a direct impact on a country's finances, economy, politics, and social and development efforts. Such actions frequently take resources away from productive areas, resulting in inefficiency and stifling economic progress. They also erode public trust in government institutions and weaken the legitimacy of the democratic system. They undermine the concept of good governance and the rule of law because they frequently include the manipulation of legal processes and institutions for personal advantage. It is also true that illegal and unethical behaviours can inhibit both domestic and foreign investments by creating an unpredictable and unequal investment and business climate.

To effectively address such challenges, extensive initiatives are required, including legal and institutional reforms, openness, accountability mechanisms, and a commitment to ethical governance. The NCell case serves as a stark reminder of the necessity for strong, proactive steps to prevent larger corporations from manipulating laws and rules for significant profits.


(Upadhyay is former managing editor of this daily.)

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