The Game of Under Invoicing

It’s a story of an Int’l Boarding School in India, which have been having glorious history of 5 decades. More than 2 thousand boys & girls from all over the world have been getting education there. Students proclaim that Study, Sports, Rules & Regulations, everything is intact and perfect there, except one thing. They haven’t been served meal in adequate quantity and quality. Because of such crisis, they have been enforced either to steal Chapatti, Rice, and Vegetable etc from their School Canteen at midnight or they have to buy from outside. Buying from outside even isn’t allowed there. At a first glance, it seems absurd story. As soon as we go in depth of the story, it would be much interesting.
Till two decades back, there wasn’t such kind of meal crisis. Those days, School Canteen Contractor appeared to find various ways to cut his cost and to make more and more savings. As primary saving, contractor used to serve lower quality food for students keeping good quality foods for teachers and administrative team separately. Gradually, the greed to contractor enforced him to increase the quantity of water in vegetables curry and daal etc. Since, school teachers and administrative staffs were satisfied with contractor by various means, they never bother to control such kind of malpractices of him.
Those days, a group of naughty students as a revolt started stealing some foods from Canteen. Quantity was negligible, so school administration felt better and safe to ignore those acts. Such midnight activities as well as contractor’s bill had been increasing day by day. Students, Contractors and Administrator all were happy and satisfied in such kind of silent understanding; however schools’ income – expenditure a/c was badly affected. Nowadays, everyone there has been enjoying those extra privileges. At the same time, everyone there has been playing blame game simultaneously.Above said story seems applicable to the story of Under Invoicing Trend in Nepal as well. Everyone seems enjoying extra privileges of Under Invoice and at the same time, enjoying blame game simultaneously. Till few decades back, there was a special HUKUM (straight forward order) from the apex authority of Shree Panch ko Sarkar to let some particular tribal group of Nation to bring foreign goods from Overseas Market for commercial purpose without paying any kind of Tax. Reason was said that it’s an initiation for social upliftment of deprived people. Gradually, such kind of privilege shifted into rest of Nepalese Traders.
One more example: those days, regional authorities used to call an emergency meeting of big or small smugglers (involved in illegal trade) at the eve of Bijaya Dashami and used to urge supply sugar and other necessary material in adequate quantity to Kathmandu by hook or by crook. Those days, there was an open instruction to security and custom agencies to keep their eyes closed at boarder area for particular Dashai period. Gradually, such trend got expanded for rest of the year as well.
At present, Government Sector as well as Business Sector both seem loudly against Under Invoicing Trend. Both agree that under invoicing means great loss in Revenue as well healthy business atmosphere. Business Sector has been enjoying Under Invoicing, because they believe that they can win price competency in market through this type of mechanism only. Consumers have been ignoring Under Invoicing, because they have learnt that Full Invoicing means extra payment. Government authorities have been fighting against Under Invoicing Trend majorly through Goods’ Re-Valuation during custom clearance. Post Custom Audit, Full Assessment, Deep Investigations too are common tools of Nepalese Government to control Under Invoicing. Despite all kind of efforts, result still is far away from us.
At the eve of declaration of New Budget, we need to expect some smart declaration in this regard. Can we expect VAT tariff in two or three rates? Can we expect Uniform Valuation Method applicable to all over the Custom Offices including Tatopani Custom Office? Can we expect independent department for settlement of tax disputes in FAST TRACK method? Can we expect unbiased Carrot and Stick Policy for Government Department as well as Business Community? The honest move for these expectations might be a landmark to control Under Invoicing Trend in Nepal.
Similarly, there is an authority to each custom office to buy imported goods paying some extra on billing amount. However, such authority has been almost ineffective from day one. Reason no. 1: The sanctioned budget to buy goods at custom check point is very inadequate. Reason no. 2: There is no designated department/ unit to resell purchased goods. Reason no. 3: Government sees such process as the extra burden for self. As soon as Government addresses these three reasons, problem would be solved. The honest move to make such kind of authority much more effective might be a landmark to control Under Invoicing Trend in Nepal.
Mostly people from Business Sector claim that the basic reason behind Under Invoice is unhealthy price competition in market, rather than making extra profit. People don’t hesitate to declare that due to such unhealthy price competition, market is overwhelming with low quality products. Mostly Importers hesitate to declare their company name and Service Mark on their imported products. As the result consumers too seem confused about better quality products and are tagging behind lower priced products only. Government should intervene in such kind of unhealthy price competition.
There should be a mandatory that each imported products should carry the description of Importer Company as well as it’s service mark. Through service mark and name of Importer Company, consumers would be able to determine the quality of particular products imported by particular company. In this way, consumers would be educated to move for those products only, whose importer or service mark are well tried and tested, rather than tagging behind lower price products. An honest move in this direction too, might be a landmark to control Under Invoicing Trend in Nepal.
In nut shell, there should be bridge of trust between administrator and students. The contractor shouldn’t be allowed to come between dialogues of both. Let’s hope for some smart moves from Government.