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Trade Misinvoicing: What can we Measure?


  • Tandon, Suranjali

    () (National Institute of Public Finance and Policy)

  • Rao, R. Kavita

    () (National Institute of Public Finance and Policy)


The existing studies on trade misinvoicing have focussed on the discrepancy in reported trade statistics between developing and developed countries. The estimates based on such methods rely on the assumption that developed countries report their trade statistics correctly. In this paper, we provide evidence that trade misinvoicing between developed countries is in fact large and any esti-mate based on such method may not provide an accurate representation of the dimensions of trade misinvoicing in the world. Further, there is need to develop a methodology by which one can attribute the misinvoicing to one or the other trade partner. To address this problem, we offer an alternative methodology. Since the exports of a country are necessarily imports of another country we use do-mestic factors to predict the export and import misinvoicing for a sample of large misinvoicers for the period 1990 to 2014. Such estimates allow us to establish whether the discrepancy can be at-tributed to the export or the import side for all countries. We find that the domestic factors better explain the export side, therefore, allowing us to estimate illicit flows through trade misinvocing us-ing the export misinvoicing by all countries.

Suggested Citation

  • Tandon, Suranjali & Rao, R. Kavita, 2017. "Trade Misinvoicing: What can we Measure?," Working Papers 17/200, National Institute of Public Finance and Policy.
  • Handle: RePEc:npf:wpaper:17/200
    Note: Working Paper 200, 2017

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    References listed on IDEAS

    1. Ila Patnaik & Abhijit Sen Gupta & Ajay Shah, 2012. "Determinants of Trade Misinvoicing," Open Economies Review, Springer, vol. 23(5), pages 891-910, November.
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    4. Renuka Sane, 2017. "Stock market participation in the aftermath of an accounting scandal," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-006, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Biswajit Mohanty & N.R. Bhanumurthy & Ananya Ghosh Dastidar, 2017. "What explains regional imbalances in public infrastructure expenditure? Evidence from Indian states," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 24(2), pages 113-139, December.
    6. Sacchidananda Mukherjee, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers id:11770, eSocialSciences.
    7. Mohanty, Biswajit & Bhanumurthy, N. R. & Dastidar, Ananya Ghosh, 2017. "What explains Regional Imbalances in Infrastructure?: Evidence from Indian States," Working Papers 17/197, National Institute of Public Finance and Policy.
    8. Rao, R. Kavita & Tandon, Suranjali, 2016. "Revisiting the tax compliance problem using prospect theory," Working Papers 16/169, National Institute of Public Finance and Policy.
    9. James Boyce & Léonce Ndikumana, 2008. "New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options," Working Papers wp166, Political Economy Research Institute, University of Massachusetts at Amherst.
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    Cited by:

    1. Tiwari, Atul Kumar & Ghei, Dhananjay & Goel, Prerna, 2017. "Social Security Agreements (SSAs) in practice: Evidence from India's SSAs wih countries in Europe," Working Papers 17/203, National Institute of Public Finance and Policy.
    2. Carton, Christine & Slim, Sadri, 2018. "Trade misinvoicing in OECD countries: what can we learn from bilateral trade intensity indices?," MPRA Paper 85703, University Library of Munich, Germany.

    More about this item


    illicit financial flows ; misinvoicing ; developing countries ; corruption ; tariffs ; capital controls;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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