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Tax Evasion in Kenya and Tanzania:Evidence from Missing Imports

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Author Info
Levin, Jörgen () (Department of Business, Economics, Statistics and Informatics)
Widell, Lars (Department of Business, Economics, Statistics and Informatics)

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Abstract

In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in both Kenya and Tanzania. According to the Transparency International Corruption Perceptions Index, Kenya is more corrupt than Tanzania, but we find that the coefficient on tax is higher in Tanzania compared to Kenya implying that tax evasion on imported goods is higher in Tanzania compared to the Kenya. We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya-United Kingdom case compared to the Tanzanian-United Kingdom case which supports our previous finding that tax evasion is more severe in the Tanzanian customs authority.

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Publisher Info
Paper provided by Örebro University, Swedish Business School in its series Working Papers with number 2007:8.

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Length: 33 pages
Date of creation: 01 Nov 2007
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Handle: RePEc:hhs:oruesi:2007_008

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Related research
Keywords: Tax evasion; corruption; trade; Kenya; Tanzania;

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

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References listed on IDEAS
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  1. Pritchett, Lant & Sethi, Geeta, 1994. "Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts," World Bank Economic Review, Oxford University Press, vol. 8(1), pages 1-16, January.
    Other versions:
  2. Kong-Pin Chen & C.Y. Cyrus Chu, 2005. "Internal Control vs. External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 151-164, Winter.
  3. Keith J. Crocker & Joel Slemrod, 2004. "Corporate Tax Evasion with Agency Costs," NBER Working Papers 10690, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Marrelli, Massimo, 1984. "On indirect tax evasion," Journal of Public Economics, Elsevier, vol. 25(1-2), pages 181-196, November. [Downloadable!] (restricted)
  5. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April. [Downloadable!] (restricted)
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  6. Marrelli, M. & Martina, R., 1988. "Tax evasion and strategic behaviour of the firms," Journal of Public Economics, Elsevier, vol. 37(1), pages 55-69, October. [Downloadable!] (restricted)
  7. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
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