Nepalese brands engage in illegal foreign payments
Nepal is a country full of irony. On one side, Nepal makes weird laws prohibiting local brands and citizens from making foreign payments. On the other side, multiple sponsored posts from various Nepalese brands inundate your social media accounts. Don’t you wonder, how, in spite of Forex restrictions, are these brands sponsoring ads? After all, Facebook and Twitter do not accept payments in Nepal Rupees(NPR).
In this article, we will try to, first, talk about how brands are overriding Nepal’s regulations. Then, we will talk about the implications this has on Nepal’s economy. Finally, we will talk about the urgent need to overhaul Nepal’s archaic forex rules.
Brands bypassing Forex restrictions
How many times have you come across a Nepali ad while on Facebook or Youtube? Too many times to count, right? However, did you know that under existing financial laws, an individual is only allowed to spend up to $500 USD for foreign payments? While regulations allow big brands to spend more than the $500, how are small companies and startups bypassing the limitation? Simple. They are using foreign account holders’ cards to make the payment.
Implications of Forex payment
What is the problem with this? First and foremost, since placing an ad on social media is a business transaction, it bypasses taxes. There are two issues with this. First, the one who is making the payment avoids paying tax. Even more problematic, however, is the fact that these multi-billion dollar tech companies pay zero sum to Nepal in spite of making money off business transaction here.
While our government is going nuts over our fast depleting Forex reserve, lack of proper vision has led to these tech giants siphon off our money without having any tax obligations here. India has forced companies like Facebook and Twitter to register as a business locally. However, it remains a pipe dream as of now in Nepal.
Need to overhaul Nepal’s Forex rules
This brings us to the real crux of the issue. Big companies are allowed to make foreign payments while individuals and small start ups are not. How is this fair? Market works best only when the rules of the game is fair for everyone. When the playing field is set differently for a startup, they are more than likely to fail. No wonder why India and China experienced exponential growth in entrepreneurship culture , while we have yet to witness that phenomenon here.
Nepal government and Nepal Rastra Bank need to understand that if it really wants its economy to do well, it needs to unchain its local businesses. Our mission in highlighting this issue of companies using foreign accountholders to make payment is not to harass them, but rather to stress that small businesses need to be able to advertise on social media platforms. Traditional advertising mediums like TV and print are increasingly becoming obsolete. Moreover, the cost of advertising is comparatively cheaper in social media platforms. Add to that the number of people a business can reach through social media is exponentially higher than through traditional mediums.
Talking about irony
And yes, talking about irony; the same politicians who have made these restrictive laws routinely flout it. Case in point, look at UML’s deputy mayoral candidate’s sponsored post on Facebook! What is Election commission even doing? Isn’t it against the protocol to use foreign investment for election promotion? Does Election commission even care about the source of these foreign payments?
