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Is it me or you? A deeper insight into profile of misreporting economies

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  • Dujava, Daniel
  • Siranova, Maria

Abstract

Trade misinvoicing has been used as one of the measures of illicit capital flows. However, estimates are likely to be biased due to the common assumption of no misinvoicing on the part of developed countries, and insufficient treatment of transportation and insurance costs. In this paper we address both of these issues by estimating the extent of trade misinvoicing that depends on particular combination of traits of exporting and importing country. Given our results, incentives to misreport tend to be stronger when goods are shipped from low- to high-income country or among the poor peers. The relatively new tendency for multinational businesses to engage in tax base erosion might be reflected in our second important finding, i.e. that combination of high-tax exporter and low-tax importer implies underinvoicing on the side of exporter and/or overinvoicing on the side of importer. Thirdly, level of financial development seems to play a decisive role, especially when connecting the receivers of capital on exporter's side and financially repressed economies on importer's side.

Suggested Citation

  • Dujava, Daniel & Siranova, Maria, 2022. "Is it me or you? A deeper insight into profile of misreporting economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 10-25.
    • Handle: RePEc:eee:quaeco:v:83:y:2022:i:c:p:10-25
    DOI: 10.1016/j.qref.2021.10.002
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    More about this item

    Keywords

    Trade misinvoicing; Illicit capital flows; CIF/FOB ratio; Capital flight;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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