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Tariff Evasion and Customs Corruption: Does Pre-Shipment Inspection Help?

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Author Info
Jose Anson (Universal Postal Union)
Olivier Cadot (University of Lausanne)
Marcelo Olarreaga (World Bank)

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Abstract

This paper provides a new approach to the evaluation of pre-shipment inspection (PSI) programs as ways of improving tariff-revenue collection and reducing fraud when customs administrations are corrupt. We build a model highlighting the contribution of private surveillance firms to the generation of information and describing how incentives for underinvoicing and collusive behaviour between importers and customs are affected by the introduction of PSI. It is shown theoretically that the introduction of PSI has an ambiguous effect on the level of fraud. Empirically, our econometric results suggest that the introduction of PSI services increased underinvoicing in Argentina and Indonesia, and reduced it in the Philippines.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1600&context=bejeap
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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): contributions.5 (2006)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:33

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Web page: http://www.bepress.com/bejeap

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Related research
Keywords: tariff evasion; underinvoicing; pre-shipment inspection;

Other versions of this item:

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
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  1. Fisman, Raymond & Wei, Shang-Jin, 2001. "Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China," CEPR Discussion Papers 3089, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    Other versions:
  3. Lee, Kangoh, 2001. "Tax evasion and self-insurance," Journal of Public Economics, Elsevier, vol. 81(1), pages 73-81, July. [Downloadable!] (restricted)
  4. Cremer, Helmuth & Gahvari, Firouz, 1996. "Tax evasion and the optimum general income tax," Journal of Public Economics, Elsevier, vol. 60(2), pages 235-249, May. [Downloadable!] (restricted)
  5. De Wulf, Luc, 1981. "Statistical analysis of under- and overinvoicing of imports," Journal of Development Economics, Elsevier, vol. 8(3), pages 303-323, June. [Downloadable!] (restricted)
  6. Johnson, Noel, 2001. "Committing to civil service reform : the performance of pre-shipment inspection under different institutional regimes," Policy Research Working Paper Series 2594, The World Bank. [Downloadable!]
  7. Gatti, Roberta, 1999. "Corruption and trade tariffs, or a case for uniform tariffs," Policy Research Working Paper Series 2216, The World Bank. [Downloadable!]
  8. Robert C. Feenstra & Gordon H. Hanson, 2000. "Aggregation Bias in the Factor Content of Trade: Evidence from U.S. Manufacturing," American Economic Review, American Economic Association, vol. 90(2), pages 155-160, May. [Downloadable!] (restricted)
  9. Dean Yang, 2004. "Can Enforcement Backfire? Crime Displacement in the Context of Customs Reform in the Philippines," Working Papers 520, Research Seminar in International Economics, University of Michigan. [Downloadable!]
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  10. Kiefer, Nicholas M, 1978. "Discrete Parameter Variation: Efficient Estimation of a Switching Regression Model," Econometrica, Econometric Society, vol. 46(2), pages 427-34, March. [Downloadable!] (restricted)
  11. Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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