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Tax evasion in Kenya and Tanzania: Evidence from missing imports

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  • Levin, Jörgen
  • Widell, Lars M.

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 Tanzania. 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 suggests that tax evasion is more severe in the Tanzanian customs authority.

Suggested Citation

  • Levin, Jörgen & Widell, Lars M., 2014. "Tax evasion in Kenya and Tanzania: Evidence from missing imports," Economic Modelling, Elsevier, vol. 39(C), pages 151-162.
    • Handle: RePEc:eee:ecmode:v:39:y:2014:i:c:p:151-162
    DOI: 10.1016/j.econmod.2014.02.021
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    Cited by:

    1. Cyril Chalendard, 2015. "Use of internal information, external information acquisition and customs underreporting," Working Papers halshs-01179445, HAL.
    2. Lorenzo Rotunno & Pierre-Louis Vézina, 2012. "Chinese Networks and Tariff Evasion," The World Economy, Wiley Blackwell, vol. 35(12), pages 1772-1794, December.
    3. Joël CARIOLLE & Cyril CHALENDARD & Anne-Marie GEOURJON & Bertrand LAPORTE, 2017. "Going beyond analysis of internal data to support customs modernization: a case study in Gabon," Working Papers P173, FERDI.
    4. Ronald B. Davies & Zuzanna Studnicka, 2022. "Tariff Evasion, the Trade Gap, and Structural Trade," CESifo Working Paper Series 10151, CESifo.
    5. repec:idq:ictduk:16548 is not listed on IDEAS
    6. Andualem T Mengistu & Kiflu G Molla & Giulia Mascagni, 2022. "Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data," Journal of African Economies, Centre for the Study of African Economies, vol. 31(1), pages 94-122.
    7. Gor, Seth Omondi, 2012. "An Assessment of the Informal Sector Trade in Kenya," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 13(1), pages 1-13, April.
    8. Lin, Chin-Ho, 2018. "Tariff evasion in machinery production networks: Evidence from East Asia," Economic Modelling, Elsevier, vol. 70(C), pages 115-126.
    9. Kalkuhl, Matthias & Fernandez Milan, Blanca & Schwerhoff, Gregor & Jakob, Michael & Hahnen, Maren & Creutzig, Felix, 2017. "Fiscal Instruments for Sustainable Development: The Case of Land Taxes," MPRA Paper 78652, University Library of Munich, Germany.
    10. Joel CARIOLLE & Cyril CHALENDARD & Anne-Marie GEOURJON & Bertrand LAPORTE, 2016. "Décloisonner l’analyse des données pour appuyer la modernisation des douanes : une illustration à partir du Gabon," Working Papers 201618, CERDI.
    11. Cyril Chalendard, 2015. "Use of internal information, external information acquisition and customs underreporting," CERDI Working papers halshs-01179445, HAL.
    12. Temesgen Worku & Juan P. Mendoza & Jacco L. Wielhouwer, 2016. "Tariff evasion in sub-Saharan Africa: the influence of corruption in importing and exporting countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 741-761, August.
    13. Md. Harun Ur Rashid & Afzal Ahmad & Muhammad Saleh Abdullah & Monir Ahmmed & Serajul Islam, 2022. "Doing Business and Tax Evasion: Evidence from Asian Countries," SAGE Open, , vol. 12(4), pages 21582440221, October.
    14. Fawzi Banao & Bertrand Laporte, 2022. "Terrorism, Customs and fraudulent Gold exports in Africa," Working Papers hal-03889094, HAL.
    15. Antoine Bouët & Devesh Roy, 2012. "Trade protection and tax evasion: Evidence from Kenya, Mauritius, and Nigeria," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 287-320, April.
    16. Harini Weerasekera, 2018. "Tax Rates and Tax Evasion," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(2), pages 229-250, September.
    17. Epaphra, Manamba, 2015. "Tax Rates and Tax Evasion: Evidence from Missing Imports in Tanzania," MPRA Paper 62328, University Library of Munich, Germany.
    18. Jon Bakija & Ivan Badinski, 2014. "Evidence on the Responsiveness of Export-Related VAT Evasion to VAT Rates in the EU," Department of Economics Working Papers 2014-06, Department of Economics, Williams College.
    19. Tasew Tadesse, 2023. "Explaining Customs Tax Evasion in Ethiopia: The Effect of Trade Tax, Law Enforcement, and Product Characteristics," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(3), pages 330-353, September.
    20. Fadi Alasfour, 2019. "Costs of Distrust: The Virtuous Cycle of Tax Compliance in Jordan," Journal of Business Ethics, Springer, vol. 155(1), pages 243-258, March.
    21. Gupta, Pranav Kumar & Roy, Devesh & Ahmad, Kaikaus, 2012. "Close eye or closed eye: The case of export misinvoicing in Bangladesh," IFPRI discussion papers 1157, International Food Policy Research Institute (IFPRI).

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    More about this item

    Keywords

    Tax evasion; Africa; Trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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