Controversial Ncell Sale: Unraveling the Complex Web of Tax Evasion, Investment Tactics, and Legal Battles
Malaysian firm Axiata's sale of 80% Ncell shares to UK's Spectralite for 6.65 billion rupees ($50 million) has ignited accusations of tax evasion and exploitation of legal loopholes. The Public Accounts Committee in Nepal is investigating, raising concerns about the transaction's transparency and legality. The sale comes amid ongoing legal battles, including a past dispute over capital gains tax and the recent challenge to Ncell's ownership, prompting scrutiny and an uncertain future for the telecommunications company.
In a recent development, the sale of Ncell shares by Malaysian company Axiata to UK-registered Shatishlal Acharya's company Spectralite for 6.65 billion rupees ($50 million) has ignited a storm of controversy. Allegations of tax evasion, investment protection maneuvers, pending court cases, and exploitation of Telecommunications Act loopholes are now at the forefront.
The controversy deepened when the Public Accounts Committee of the House of Representatives in Nepal, concerned about the Ncell transaction, summoned the Nepal Telecommunication Authority, Internal Revenue Department, and the Office of the Company Registrar to provide immediate answers to nine probing questions.
The Ncell case has become a focal point of discussions on social media, and even Prime Minister Pushpa Kamal Dahal "Prachanda" announced an investigation into the share purchase and sale.
Axiata Group's decision to sell its 80% owned shares in Raynald Holding, which holds the majority stake in Ncell, was explained through a statement citing a deteriorating business environment, an unpredictable tax system, and political instability in Nepal.
The buyer, Shatishlal Acharya's Spectralite, is set to acquire the shares for 6.65 billion rupees, with a payment of USD 5 million due within the next six months and the remaining USD 45 million to be paid over 48 months.
The transaction raised eyebrows, given Axiata's purchase of Ncell for 1.36 billion US dollars eight years ago, leaving lingering questions about the reasons behind the sale and the substantial difference in the selling price.
The controversy traces back to Axiata's acquisition of Reynald Holding's shares, the previous majority owner, amid debates over capital gains tax evasion. The Supreme Court ruled that capital gains tax must be paid, leading to a significant tax assessment on Ncell.
Subsequent legal battles ensued, with Ncell filing a case against the Nepal government in the International Investment Disputes Settlement Body under the World Bank. Despite a ruling in favor of the government, Ncell failed to secure compensation.
The recent sale to Spectralite has prompted speculation about Acharya's motives. Analysts point to potential advantages stemming from Telecommunications Act loopholes, allowing him to gain control of Ncell's assets after the license expiration in 2086.
Acharya's options include transferring shares to family members, lobbying for license extension amendments, or navigating regulatory processes for potential ownership changes. The government's ability to tax and control Ncell's property remains a key concern, with critics questioning the legitimacy of the sale.
As the controversy unfolds, the Nepalese government faces challenges in addressing concerns about tax evasion, investment climate, and legal intricacies. Failure to do so may impact the country's reputation and hinder its prospects at international investment conferences.
