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Misinvoicing Imports: the Interdependence of Tax and Tariff Evasion


  • Günther G. Schulze

    (University of Konstanz)


This article shows how tax systems can be made compliance enforcing by the requirement that taxable objects be declared consistently for different taxes. Pars pro toto we analyze an importer of inputs who can partly evade income taxes and duties by misdeclaring the same import price to both tax and customs authorities. We show that, first, revenue-maximizing authorities audit with an endogenous probability that depends positively on the extent of misdeclaration; second, the profit-maximizing importer will either over- or underinvoice, the sign of misdeclaration depending on the relative tax and tariff rates, whereas the extent of misdecla ration is determined by the detection function and the penalty; third, setting tax and tariff rates appropriately will reduce or eliminate evasion, if authorities cross-check.

Suggested Citation

  • Günther G. Schulze, 1994. "Misinvoicing Imports: the Interdependence of Tax and Tariff Evasion," Public Finance Review, , vol. 22(3), pages 335-365, July.
  • Handle: RePEc:sae:pubfin:v:22:y:1994:i:3:p:335-365

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    Cited by:

    1. Jansen, Willem Jos & Schulze, Günther G., 1994. "The effectiveness of Norwegian capital controls," Discussion Papers, Series II 242, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Ila Patnaik & Abhijit Sen Gupta & Ajay Shah, 2012. "Determinants of Trade Misinvoicing," Open Economies Review, Springer, vol. 23(5), pages 891-910, November.
    3. Daniel Dujava & Maria Siranova, 2017. "Getting the Measures of Trade Misinvoicing Right: Bilateral Panel Data Approach," Working Papers wp98, Institute of Economic Research, SAS, revised 20 Dec 2017.

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