Government must launch a crackdown on under-invoicing in exports of carpets and other goods to save the country’s economy

 The Trade and Export Promotion Centre (TEPC) has made a startling revelation that under-invoicing in carpet exports to China is rampant. According to a study carried out by the TEPC, under-invoicing in carpet exports has resulted in massive loss of revenue to the government. Nepal exported around 100,000 square metres of carpet to China in the last fiscal and 56,000 square metres in the first seven months of this fiscal. The TEPC suspects misappropriation of around Rs 1.3 billion in the last fiscal and at least Rs 415 million in the first seven months of this fiscal through false declaration at the customs points. It costs at least $100 to manufacture one square metre of carpet. However, traders have been declaring the cost of each square metre of carpet at just $26 at the customs points while exporting the product to China, according to Sarad Bickram Rana, executive director of the TEPC.

While false declaration of cost of goods at the customs point with prices maintained too low causes income tax loss to the government, it also helps flourish the informal channels of money transaction like hundi. This practice hence raises the threat of misuse of foreign currency earned through exports. At a time when the country is seeing a slow growth of exports, such false declaration of cost of goods at the customs can weigh on the country’s economy. The TEPC suspects the practice of under-voicing could be rife in other exports. Hence this practice could be one of the reasons for the widening trade deficit. Also, the money misappropriated through under-invoicing in exports is utilised for under-invoicing during imports, making the country’s economy face a double whammy.

Carpet is the major export commodity of Nepal, with nearly 100 factories in operation, mostly in the Kathmandu Valley. As per the TEPC, the country exported 327,459 square metres of carpet worth Rs 3.82 billion in the first seven months of this fiscal. Despite the increase in quantity, export income has declined in this fiscal. The country earned Rs 4.34 billion from export of 293,088 square metres of carpet in the corresponding period of the previous fiscal. China is the recently tapped buyer for Nepali carpet, which usually finds the market in the US, Germany and other European countries. Given the grave consequences under-invoicing can have on the country’s economy, the government must nip this practice in the bud. One of the ways to curb false declaration of papers could be setting the floor price. The Ministry of Finance had about two decades ago introduced the floor price of $50 per square metre to export carpets from Nepal. But it was withdrawn later following exporters’ complaints that the floor price was creating a hurdle. The government can take into consideration the TEPC’s suggestion that exporters who declare export price over a certain benchmark price — like $100 or $150 — be provided certain incentive to encourage. This may encourage traders to declare the actual price of export products. But as an immediate measure, the government must launch a crackdown to stop the practice of under-invoicing. Those involved in under-invoicing must be called on the carpet and penalised.

Smart Sophia

The first humanoid robot, Sophia, visited Nepal on Wednesday to address a workshop in the Capital as a part of the United Nations’ SDGs in Asia-Pacific focusing on innovation.

Sophia, the first robot declared a citizen by Saudi Arabia, addressed a conference on the theme “Technology for Public Services” at Durbar Marg. The event was organised by the UNDP. Sophia is the most advanced robot with Artificial Intelligence (AI).

The aim of the event is to help Nepal find ways to better use technology and innovation for advancing development. During a question-answer session,

Sophia said Nepal can benefit from an AI robot in the field of education, telemedicine and customers care. Stating that Nepal can ensure “accuracy

and transparency” using the “block chain technology”, Sophia said AI can be useful also in controlling corruption.

When asked whether she had a switch to stop her in case she somehow went “crazy” or became “unruly”, Sophia quipped: “I have not lost my control”. She then fired back a question to the moderator whether a human had a button to control if s/he went crazy, sending the audience into peals of laughter, who gave her a big round of applause. Intelligent indeed!