‘Regulator should not be the top taxpayer, service providers should’

KATHMANDU: Nepal’s tax hierarchy has taken an unusual turn this year. For the first time, the Nepal Telecommunications Authority (NTA) — a regulator that neither engages in traditional commercial activities nor operates for profit — has emerged as the nation’s highest income-tax payer, overtaking long-time top taxpayers like Surya Nepal and private telecom giant Ncell.

This rare development has raised sharp questions among tax experts and industry observers, who argue that a regulator topping the tax chart signals a deeper imbalance in the telecom market, where service providers are witnessing declining revenues while the regulator sits on accumulating fees and interest income.

How Did the Regulator Outpace Multinational Giants?

Historically, Surya Nepal, Ncell, and other major private-sector firms consistently appeared within the top five highest taxpayers. Their strong sales and high cash flow kept them dominant in Nepal’s tax landscape.

But this fiscal year, NTA — a non-profit regulatory body — unexpectedly climbed to the top.

According to Inland Revenue Department (IRD) Director and Spokes Basudev Poudel , the NTA’s position stems from the large volume of fees it collects from telecom operators, not from commercial profit.

“In our view, the NTA is simply a taxpayer like any other entity, including Ncell or Surya Nepal,” Poudel said. “I am surprised why the media is amplifying this issue this year.” He further noted that the Ministry of Finance has formed a jury committee based on the guidelines prepared in 2012 (2069 BS), and that this committee is responsible for deciding which entity receives the highest taxpayer recognition.

The regulator is paying tax not from revenue it generates, but from interest income accrued on fees deposited by telecom service providers — including spectrum fees, license renewal fees, regulatory charges, and rural telecom development contributions.

Huge Payments From Operators Swelled NTA’s Balance

Last year, Nepal Telecom deposited Rs 20 billion in one go as part of its five-year license renewal obligation. Ncell, meanwhile, paid Rs 5 billion in installments to the NTA.

Telecom companies are also required to pay:

These payments generated a large pool of funds, which the NTA deposited in fixed-term bank accounts. The interest earned on these deposits became the primary source of the income tax it paid — allowing the regulator to surpass corporate giants.

An NTA official admitted, “The authority’s main earnings last year came from interest on accumulated funds.”

Service Providers Falling Behind as Market Shifts

In contrast, major telecom operators are slipping in the rankings as their revenues stagnate or decline.

Nepal Telecom — regulated by the NTA — became the top VAT payer, but not due to rising profits. The IRD clarified that Nepal Telecom topped the list only because it paid VAT regularly and consistently for six consecutive years, not because of extraordinary earnings.

IRD Director Poudel explained, “Many companies pay high VAT in individual years, but Nepal Telecom paid regularly and consistently over six years, which pushed it to the top.”

Industry-wide, telecom revenues are under pressure. Increased use of OTT services — like Messenger, WhatsApp, Viber, and TikTok — has sharply reduced income from traditional voice calls and SMS, long the backbone of telecom earnings.

As a result, Ncell, which paid Rs 17 billion last year and topped the ICT tax list,
has fallen from its position, overtaken this year by Verix Nepal Pvt. Ltd.

Nepal Telecom is also experiencing revenue slowdown. Heavy-capex operators are gradually slipping out of the top taxpayer lists.

Chartered accountant Koshraj Koirala said the decline is natural, “Telecom earnings are falling due to market shifts. When one sector slows and another booms, the tax ranking changes accordingly.”

Surya Nepal Also Off the Top List

Surya Nepal — long a dominant taxpayer across income tax, VAT, and excise duty — has also slipped out of the integrated top taxpayer list.

Until FY 2079/80, Surya Nepal consistently topped the tax lists because the three major taxes were counted together. But since FY 2080/81, IRD removed this integrated method, causing Surya Nepal to fall from the ranking.

Poudel clarified, “Surya Nepal always topped when we had the integrated system for three taxes. Once that system was removed, the company naturally dropped out of the list.”

Experts Raise Red Flag: “A Regulator Should Not Be the Top Taxpayer”

While some hail the NTA’s tax contribution, experts argue that this trend indicates stress in the telecom sector, which is supposed to be among the biggest contributors to the economy.

A senior economist remarked privately,“When the regulator becomes the top taxpayer instead of service providers, it signals that operators are struggling. This is not a healthy sign for Nepal’s ICT ecosystem.”

The rise of the regulator — fueled by operators’ mandatory fees — and the simultaneous decline of service providers raises critical policy questions about market sustainability, investment climate, and sectoral growth in Nepal’s telecom industry.