“Charge against Cotivity is not only illicit but also inimical to FDI”

KATHMANDU, APRIL 3:  On March 31, the Department of Revenue Investigation (DRI) filed a case against Cotivity Nepal Ltd in the Patan High Court on a charge of revenue leakage and sought to recover Rs 10.36 billion from the company.

According to the DRI, the company was found evading income and value-added taxes worth Rs 5.18 billion, thus leading to an equal amount being imposed as a penalty.

However, Rudra Raj Pandey, owner of this Nepali company that is being run as an IT-based subsidiary of Cotiviti Inc., USA, termed the accusation strictly unlawful. “Our company is operating in Nepal just as a cost centre which means it does not have a direct role in generating revenues and profits for the mother company. Such being the case, Cotivity Nepal is not legally obliged to pay any taxes related to such generations to the Nepal government.”

On April 1, the DRI took another step against the company by asking the Company Registrar’s Office to stop its liquidation process.

It is said that Cotivity Nepal has already appointed an Auditor and Liquidator to close down the company as per Section 126 of the Cotivoty Company Act and open a new venture with a similar nature named Nepal Infinite Compute Solutions. According to the department, the very move is cunningly intended to evade taxes.

But, again, Pandey flatly refuted this charge by claiming,” Cotivity Nepal is being closed down not because of the intention of evading taxes but because of the transfer of its share ownership to India-based Infosys. ” Transfering share ownership from time to time among its subsidiaries located in various companies is a corporate policy of Cotivity Inc.”

According to Pandey, the latest gestures of the DRI (against his company) just show the incompetent and corrupt nature of the country’s tax administration.

Stating there are more than 100 companies being run with foreign direct investment (FDI) in Nepal like Cotivity he argued, “If the DRI also treats them as illicitly as to us, all of them will shut down.

“The illicit harassing of any such company also amounts to sending a negative message to potential foreign investors at a time when the government is preparing to hold the Investment Summit 2024,” he argued.