Reducing tariff evasion: The role of trade facilitation

Cosimo Beverelli and Rohit Ticku

Journal of Comparative Economics, 2022, vol. 50, issue 2, 534-554

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.

Keywords: Customs procedures; International trade; Tariffs; Tariff evasion; Trade facilitation agreement; World trade organization (search for similar items in EconPapers)
JEL-codes: F1 F13 F14 H26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:50:y:2022:i:2:p:534-554

DOI: 10.1016/j.jce.2021.12.004

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