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Doing business in the developing world is essentially the same as in the industrialized world: sell product, turn a profit, repeat.  The differences lie in the makeup of the costs of that product or service and what people will do to make a profit.  Foreign business practices and their sometimes attendant vices are what make it difficult at least, and unprofitable at worst.  To make things interesting, there are also cultural differences that show up.  In some cases, the cultural differences lead to the different views of a business practice, like the view that one does not have to pay taxes because the government collecting the money steals it.  The democracy loving American pounds his fist on the table and says, “Pay the taxes and hold the stumpy bastards accountable!”  We know this is a sound principle, but it is rather impractical to implement when you are in the middle of it and everyone else is propagating it or apathetic.  People evade every type of tax that is levied; some even specialize in evading a specific tax.  And there are myriad methods to effect each kind of evasion. Import Tax Evasion Customs evaders often work with two invoices, the real one and one with a lowered price.  The advancement in color photocopier technology makes this job much easier.  A burst of greedy creativity can save an importer hundreds or thousands of dollars in customs payments.  Some suppliers are kind enough to provide two invoices, saving time and energy in altering the original.  And for the smugglers who are too stupid to be creative, a little payola to a customs agent gets good results, but the bribe is usually more than the cost of getting someone to alter the invoices, therefore a smaller savings.  Also, the customs agents are occasionally watched.  So depending

Three years ago Steve Williams, a US Citizen, moved to Tirana Albania with his Albanian wife, whom he met in Minneapolis. He rented an office and started a business selling backup generators to NGO's and Aid organizations. He eventually learned to speak Albanian fairly well, he says. The couple was there when downtown Tirana turned into a Media center because of the American bombing of Belgrade, and they saw the refugees stream in from Kosovo. Steve Williams and his wife are back in DC now. He is going to grad school, and his wife works for Voice Of America. . Additional Resources EscapeArtist.com seach engine Tax Havens  2nd Passports  Overseas Jobs  Living Overseas  Unique Lifestyles  Regional Directory  Maps Of The World  World's Newspapers  Offshore Investments  World Reference Desk  Offshore Investment Articles  Expatriates Classified Section  Contact Steve Williams  .

Another way to evade customs is to make the product look like something else that is taxed at a lower rate.  Cooking oil can be dyed to look like unprocessed vegetable oil.  Unprocessed oil gets into the country much cheaper than refined oil.  The disguised oil is taken across the border (with a fake invoice) and customs are paid on it.  It is delivered to the warehouse and allowed to sit for a few days.  The dye settles to the bottom and is siphoned off.  The oil is then bottled.  This scam works especially well on items that need special analysis to determine its composition, like steel and other building materials.  This leads to concerns in the construction industry: are the building contractors getting what they are paying for and are the newly constructed buildings safe?

Sales and Income Tax Evasion

Evading sales and income taxes usually involve keeping a second set of books, or keeping books so slovenly that they don’t accurately reflect reality.  Again, a payment to the tax auditor when he completes his review of your books can make his report to his supervisors favorable. Some tax auditors offer their services as tax consultants and will tidy up your books before they come to call in their official capacity.  The hazard to this system is knowing who is keeping the real books.  The owner might tell the bookkeeper to keep a ‘tax’ set of accounts alongside the real books.  Since the bookkeeper is going through all the effort to make a believable second copy, he may make a third ‘owner’s’ copy.

These savings can be the difference between a competitive and non-competitive business.  In Tirana, an American was importing chicken legs from the U.S.  He bought directly from a processing plant with which he established a good relationship.  He was also an agent for a shipping firm and got the cheapest freight possible.  His Albanian partner had a trucking company that moved the containers from Greece to Albania.  He had done everything to get his product to market at rock bottom prices.  Well, everything except evade taxes. 

His Albanian competitors would buy American chicken legs from Greek importers who were taking a mark up on product and freight.  The Albanian chicken sellers were able to under cut the American on price anyway. And in a market as price conscience as Albania, the American’s chicken stayed in the freezer while the untaxed chicken flew out the door, figuratively speaking.

The general idea is don’t compete on price unless you have a super low price supplier you can protect.  Your total cost has to be lower than your competitor’s total costs minus taxes.  If this is the case, it might work, but watch out for the pirates.
 

Pirating Existing Products Pirates make copies of existing products that are either an obvious copy with sufficient quality at a low price (like software and music) or a covert copy, usually of inferior quality but at the same price as the original (common for cigarettes, food and clothes).  The pirate might be a legitimate producer during the day and only turn to pirating during the second or third shifts. Packaging for covert pirate copies are usually made at state-owned or private-printing houses will do up whatever kind of label the client orders.  He can bring in a label from a bottle of Coke or a pack of Marlboro’s and the printer will make a perfect copy.  For the pirate with more time than money, he might collect empties, wash them (or not), fill and cap.  This is especially common with bottled water.  Other items that are locally copied are cigarettes, CD’s, cassettes and cooking oil.  Pirated clothes and shoes are popular pirate imports. How the pirate gets his goods into the country and how he keeps his books is probably a whole new series of scams waiting to be unraveled.

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