Funds to control under-invoicing at customs points remain unutilized

Published On: May 3, 2018 08:23 AM NPT By: Rudra Pangeni  | @rudrapang

Customs officials can use the fund to purchase ‘doubtful’ goods from importers

KATHMANDU, May 3: Everybody in the government, including Minister for Finance Yuba Raj Khatiwada, acknowledge that under-invoicing at customs points is one of key problems behind revenue leakage and tax evasion. But officials deputed at customs points are not using an important tool at their disposal to curb such illegal practice.

The government has allocated Rs 50 million in the current fiscal year to purchase under-invoiced goods at customs points. The fund has been allocated to discourage under-invoicing of goods at customs points. But the budget has remained largely unused.

Only Rs 27,656 of the fund (less than one percent of the allocated Rs 50 million) has been used so far. Nepalgunj customs used the amount to purchased goods at the price quoted by the importer.
According to Department of Customs, customs officials can purchase under-invoiced goods by paying an additional 5 percent of the import bill price as profit to the importers. Customs offices can auction off such goods later on.

The main purpose of purchasing such doubtful goods through surprise inspection is to create an environment for importers to declare real prices, according to laws related to customs.  

Revenue collection at customs points has remained below the target in the current fiscal year. Government officials say that there is very little amount in the state coffer to pay regular bills of government expenditure. Drop in customs duty from import of garments, raw materials of tobacco and finished tobacco products in recent months have left government officials worried.

In the white paper issued by the Ministry of Finance in March, Minister Khatiwada said that revenue leakage and tax evasion in rampant at the customs points through different ways. “Importers evade taxes through under-reporting of import price and quantity and also by quoting high-value goods as lower-value goods,” Khatiwada explained in the white paper.

Despite the finance ministry’s move to curb such activities at customs points, there is no sign of improvements in collection of customs tax even though import bill is soaring with every passing year.

Office of the Auditor General (OAG) has also said that the government is not using tools at its disposal to control under-invoicing of goods at customs point. In its latest report unveiled last month, the OAG said that only Rs 400,000 was used to purchase under-invoiced goods at customs points in the last fiscal year despite allocation of Rs 1 billion for the purpose. 

OAG has also questioned the Inland Revenue Department (IRD) for not approving a separate guideline prepared to control under-invoicing of imported goods. 

Spokesperson of the Department of Customs, Shiva Bhandari, accepted that the budget allocated to purchase under-voiced goods at customs points has not been utilized. “We will very soon discuss the issue with chiefs of customs offices as they are authorized to use the budget at their discretion,” he said. 

Customs officials are regularly checking imported goods and re-evaluating, if needed, and importers are also paying taxes regularly, claimed Bhandari.

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