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Reducing tariff evasion: The role of trade facilitation

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  • Beverelli, Cosimo
  • Ticku, Rohit

Abstract

Can simplifying customs procedures reduce tariff evasion? We measure tariff evasion as the mis-representation of import values in response to increasing tariffs. In a dataset covering 121 countries and the whole set of HS6 product categories in 2012, 2015, and 2017, we show that simplifying border procedures, that is trade facilitation, reduces tariff evasion. Holding tariff rate constant at its mean, improving a country’s overall trade facilitation performance from the 25th percentile to the median reduces tariff evasion by almost 20%. The moderating effect is especially due to improving the pre-shipment legal certainty of customs procedures. Among the potential mechanisms, improving trade facilitation performance is effective in reducing tariff evasion due to under-reporting of import prices, as well as in countries with weaker control of corruption. The results suggest that countries can gradually implement trade facilitation reforms to cost-effectively minimize tariff evasion.

Suggested Citation

  • Beverelli, Cosimo & Ticku, Rohit, 2022. "Reducing tariff evasion: The role of trade facilitation," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 534-554.
    • Handle: RePEc:eee:jcecon:v:50:y:2022:i:2:p:534-554
    DOI: 10.1016/j.jce.2021.12.004
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    More about this item

    Keywords

    Customs procedures; International trade; Tariffs; Tariff evasion; Trade facilitation agreement; World trade organization;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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