Kathmandu, November 7, 2025 – In a landmark move, the Nepalese government has temporarily suspended the controversial ‘full audit’ process, bringing significant relief to the business community. Finance Minister Rameshwor Khanal announced the decision following widespread complaints about the practice, which had been criticized for fostering financial and mental strain among entrepreneurs.
The suspension targets a system accused of enabling collusion between tax officers and auditors, allegedly extorting businesses through excessive audits. A senior official from the Ministry of Finance, speaking exclusively to Capital Nepal, revealed that Minister Khanal acted swiftly after reports highlighted an “unhealthy relationship” between tax authorities and auditors, which placed undue pressure on businesses.
“This decision reflects the Minister’s commitment to fostering a business-friendly environment,” the official stated. “Unnecessary harassment of the private sector will not be tolerated.”
Official Confirmation and Exceptions
Madan Dahal, Director General of the Internal Revenue Department, confirmed the directive, stating, “The Finance Minister has ordered a temporary halt to the full audit process in response to serious complaints.” However, Dahal clarified that audits will continue for large corporate entities and companies under suspicion, particularly multinational firms and major business houses.
A Controversial Practice
Introduced to curb revenue leakage and enhance tax transparency, the full audit process has faced mounting criticism for its misuse. Despite a Finance Ministry policy limiting full audits to just 1% of large taxpayers, tax officials reportedly conducted audits on nearly all businesses annually, often at their discretion. Business owners alleged they were coerced into paying commissions as high as 0.15% of their annual turnover.
One anonymous businessman shared, “The full audit was an annual nightmare, burdening us financially and mentally. Even lawful businesses were treated like criminals, forced into excessive paperwork and coerced payments. This decision is a welcome step.”
Allegations Against Auditors
The role of auditors has also come under scrutiny, with claims they acted as intermediaries, pressuring businesses to pay additional fees. “Our own auditors, paid from our salaries, pushed us to settle with tax authorities,” another entrepreneur revealed. “They acted as brokers, undermining business ethics.”
The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) welcomed the move, noting it had repeatedly urged the government to address the issue. “We’re relieved the government has listened,” an FNCCI member said. “This will ease the unnecessary suffering of businesses.”
Calls for Long-Term Reform
While the suspension is temporary, experts argue it underscores the need for systemic tax reforms. Recommendations include digitizing the audit process, establishing clear audit criteria, and curbing the discretionary powers of tax officials. Stricter enforcement of auditors’ code of conduct and penalties for violations are also seen as critical steps.
The decision signals the government’s intent to create an investment-friendly climate in Nepal. Business leaders have expressed optimism but emphasized the need for comprehensive reforms to eliminate entrenched irregularities in the tax system.
“This is a positive first step,” said a business owner. “We hope the government continues to prioritize reforms that support a transparent and fair business environment.” For further details on tax policies, visit the Ministry of Finance’s official website or contact the Internal Revenue Department.
