Estimating Tax-Dependent Compliance: Theory and Evidence from Trade Wars

Andrew Bibler, Yuting Gao, Laura Grigolon and Mark J. Tremblay

No 12643, CESifo Working Paper Series from CESifo

Abstract: Statutory tariff rates may overstate the tariffs actually paid due to evasion and avoidance. We develop a novel method to estimate tariff compliance and apply it to the 2018 trade war, when several countries imposed retaliatory tariffs on U.S. exports. Estimated compliance falls by 25 percentage points after tariff increases; a one percentage point tariff increase reduces compliance by 1 to 2 percentage points. Compliance is lower for intermediate goods, which often qualify for duty-free treatment, and for differentiated products, whose valuation is more difficult to verify. The decline accounted for approximately $3.5 billion in foregone tariff revenue in 2019.

Keywords: tariffs; taxation; tax compliance; tax evasion; avoidance; trade war (search for similar items in EconPapers)
JEL-codes: F13 H20 H22 H26 L10 (search for similar items in EconPapers)
Date: 2026
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