Detecting Abnormal Pricing in International Trade: The Greece-USA Case

Simon J. Pak (), Stelios H. Zanakis () and John S. Zdanowicz ()
Additional contact information
Simon J. Pak: School of Graduate Professional Studies, Pennsylvania State University, Malvern, Pennsylvania 19355-1443
Stelios H. Zanakis: Decision Sciences and Information Systems Department, Florida International University, Miami, Florida 33199
John S. Zdanowicz: Center for Banking and Financial Institutions, Florida International University, Miami, Florida 33199

Interfaces, 2003, vol. 33, issue 2, 54-64

Abstract: Government authorities, international lending agencies, and private sector firms try to detect abnormal pricing in international trade. Abnormal prices in international trade may indicate capital flight, import-duty fraud, income-tax evasion, or money laundering. We developed a framework for filtering all annual trades between two countries, which includes thousands of harmonized commodity codes and millions of import-export transactions. It produces a prioritized list of commodities traded at potentially abnormal prices and can help auditors to identify such items ranked according to likelihood of abnormal pricing. We estimated the economic impact of over invoiced imports to Greece from the United States and underinvoiced exports from Greece to the United States. These transactions shift as much as $400 million in income annually out of Greece to the US (and well over $5.5 billion out of Greece to all other countries or about four percent of the GDP of Greece), lowering the level of taxable income and the tax liability of firms operating in Greece, thus increasing the public deficit and reducing domestic investments. The treasury of Greece is losing an estimated $1.4 to $2 billion revenues annually from worldwide trade shifted income. By auditing only the top 25 income-shifting items with the US (identified through a pricing filter), the Greek treasury could capture about 3/4 of the income shifted from exports and over 1/2 of the income shifted from all imports.

Keywords: Government:; tax; policy.; International; trade. (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://dx.doi.org/10.1287/inte.33.2.54.14473 (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:inm:orinte:v:33:y:2003:i:2:p:54-64

Access Statistics for this article

More articles in Interfaces from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().