Tax Rates and Tax Evasion: Evidence from Missing Imports in Tanzania

Manamba Epaphra (emalugu_007@yahoo.com)

MPRA Paper from University Library of Munich, Germany

Abstract: Tax evasion is the basic characteristic of many developing countries. De facto tax collections are consequently far below revenue implied by published or de jure tax rates. This paper empirically examines tax rates (tariff plus VAT rates) as the determinants of customs revenue evasion across products, based on a systematic analysis of discrepancies in trade declarations for trading partners, United Republic of Tanzania, Republic of South Africa and China. The results indicate that trade gap is highly correlated with tax rates, that is, much more value is lost for products with higher tax rates. The results also show that the trade gap is correlated with tax rates on closely related products from Republic of South Africa, implying that evasion takes place through misclassification of imports from higher-taxed categories to lower-taxed ones. However, there is no evidence of misclassification of imports from China. The wide divergences between the effective and statutory tax rates in Tanzanian tax system indicate that there is a scope for raising tax revenue without increasing tax rates by reinforcing tax and customs administrations and reducing tax evasion.

Keywords: tax evasion; imports; tariff rate; and import VAT (search for similar items in EconPapers)
JEL-codes: H20 H26 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-acc, nep-iue and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in International Journal of Economics and Finance No. 2.Vol. 7(2015): pp. 122-137

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/62328/1/MPRA_paper_62328.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:62328

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).