Before start of this topic, a question that why would any body need to undervalue the invoice? The answer lies in a simple fact that so far, not all the countries have allowed free trade. Most of the countries have imposed various restrictions on import – export trade and on free valuation of the currencies. In some cases, there are instances of overvaluation too, where a particular importer wants to siphon off to his private account. While we at b2blounge do not advocate use of such practices, responding to various readers queries, we are discussing various views on the international policies that govern undervaluation of invoices.

Each country has its own laws that govern different aspects of the international trade and there is no common international policy on undervaluation of invoices. However, no country would allow or encourage undervaluation of its imports / exports as it does affect its own economy and taxation. For serious offences involving large sums of monies, a country can request even services of Interpol to track down an offender.

Most of the countries have prescribed very stringent punishment for such offences; however, this goes on unabated in many countries in African continent. In United States, getting caught for this offence could mean a good length of Jail Term; you are not allowed to hold a senior position in any company; and compulsory audit of your accounts by IRS for few years.

Importing of goods at under invoicing, if done for savings of custom duties may not benefit in all the countries. Most countries stipulate floor price to levy custom duty on product imported. For example, in early nineties, India had fixed floor pricing for every AC, video cassette recorder or handycam imported, when the importers resorted to under invoicing of the imports. Most such imports were sourced from south-east asian countries.

As most of the countries are opening up their economy, under invoicing is no more an incentive and if caught, the risk is not worth the small amount of reward. Your business and your reputation could be at stake.

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