Using internal and external sources of information to reduce customs evasion

Using internal and external sources of information to reduce customs evasion

This paper aims to identify some factors that reduce evasion of customs duties in developing countries. Following the recent literature on customs evasion, this paper proxys customs fraud by discrepancies in bilateral trade statistics. Estimates first show that the more frequently a product is imported, the more customs fraud reduces. This paper argues that this result is indicative of the fact that customs officers use what they have learned from similar import declarations - use customs' internal information - to better assess the compliance of declarations.

Then, this paper shows that relying on an information provider - a pre-shipment inspection company in this case - seems to increase tax enforcement. Results indicate that pre-shipment inspections significantly reduce observed discrepancies in trade statistics. In line with previous studies, this paper finds that the semi-elasticity of evasion increases with the tax rate. Finally, estimates confirm that enforcement is product-varying. Results are robust to various robustness checks.

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