Abstract
Multilateral organizations recommend sub-Saharan African (SSA) countries to increase international trade in order to attain sustainable economic growth. The benefits of trade can be hampered, however, by tariff evasion. Using trade data from 2008–2014 of 31 SSA countries, we examine how the association between tariff rates and value and quantity gaps (which are indicative of tariff evasion) is enhanced by corruption in both importing and exporting countries (SSA countries are referred to as importing countries, and their trade partners from outside SSA are referred to as exporting countries). Results of a series of tests show that corruption levels in both sides of the trade partnership reinforce the (positive) association between tariff rates and value and quantity gaps. This indicates that counteracting tariff evasion in SSA is a co-responsibility between trade partners.
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Notes
Following prior research, we exclude products for which trade is either restricted or distorted (nuclear reactors: HS 8401; arms and ammunition, parts and accessories thereof, HS 93; works of art, collectors’ pieces and antiques: HS 97; Kar and Freitas 2012; Wood 2006; Fisman and Wei 2007), products that are subject to import excise tax in numerous countries (beverages, spirits and vinegar: HS 22; tobacco and manufactured tobacco substitutes: HS 24; Cooper and Witt 2012), products for which there is a time lag between exportation and importation (aircraft and space crafts: HS 88; ships: HS 89), and products for which valuation is challenging and are most often diverted from their original destination (ores: HS 26; oil: HS 27; Yeats 1978). Notably, we observe the same pattern of results without excluding these products (see robustness test G).
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We thank two anonymous reviewers, participants of the 71st Congress of the International Institute of Public Finance, and seminar participants at VU Amsterdam for useful comments on earlier drafts.
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Temesgen Worku: Financial support is provided by NUFFIC Netherlands.
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Worku, T., Mendoza, J.P. & Wielhouwer, J.L. Tariff evasion in sub-Saharan Africa: the influence of corruption in importing and exporting countries. Int Tax Public Finance 23, 741–761 (2016). https://doi.org/10.1007/s10797-016-9407-2
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DOI: https://doi.org/10.1007/s10797-016-9407-2