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Outsourcing Tariff Evasion

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  • International Monetary Fund

Abstract

Traditional explanations for indirect trade carried out through an entrepôt have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepôts may facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports to it via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, even though there is no legal tax advantage to sending goods via Hong Kong SAR. We undertake a number of extensions to rule out plausible alternative hypotheses.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/102.

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Length: 18
Date of creation: 01 May 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/102

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References

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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.
  2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  3. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.
  4. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  5. Andriamananjara, Soamiely & Arce, Hugh M. & Ferrantino, Michael J., 2004. "Transshipment in the United States," Working Papers 15871, United States International Trade Commission, Office of Economics.
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Cited by:
  1. Ferrantino, Michael J. & Wang, Zhi, 2008. "Accounting for discrepancies in bilateral trade: The case of China, Hong Kong, and the United States," China Economic Review, Elsevier, vol. 19(3), pages 502-520, September.

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