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Getting the Measures of Trade Misinvoicing Right: Bilateral Panel Data Approach

Daniel Dujava and Mária Širaňová ()

Working Papers from Institute of Economic Research, SAS

Abstract: Trade misinvoicing has been traditionally used as one of the measures of illicit capital flows. The issue of capital flight has recently come to the centre of public attention due to increasing role of capital flows not only from developing but also from developed economies to countries with favourable tax environment. Yet, determinants of trade misinvoicing remain underinvestigated in the relevant literature. On top of that, we argue that traditional measures of capital flight based on trade misinvoicing tend to be biased due to the insufficient treatment of transportation and insurance costs. In this paper we construct large data set containing bilateral panel data on trade misinvoicing covering 194 countries over the period 2001-2015. This allows us to identify extent of misinvoicing practices at individual country level while acknowledging differences between incentives to misinvoice on exporter’s and importer’s part. We decompose the extent of misinvoicing into contributions of selected determinants, such as transaction costs, measures of economic and financial development, trade openness and tax policy variables.

Keywords: trade misinvoicing; illicit capital flows (search for similar items in EconPapers)
JEL-codes: F32 F13 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-12-20, Revised 2017-12-20
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