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The Size of Trade Misinvoicing in Pakistan

Author

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  • Qureshi, Tehseen Ahmed
  • Mahmood, Zafar

Abstract

Trade misinvoicing has remained a critical issue for the entire developing world. Trade misinvoicing involves misreporting in the invoices of imported and exported commodities for various malign purposes. This study conducted estimation of the extent of trade misinvoicing carried out in Pakistan from 1972-2013 with its 21 developed trading partners in 52 major traded commodities. The study adopted c.i.f./f.o.b. methodology to measure discrepancies in the partner countries data. All four components of trade misinvoicing, i.e., imports under-invoicing, imports over-invoicing, exports under-invoicing and exports over-invoicing are estimated here. The study finds that total trade misinvoicing in Pakistan for the overall period of 41 years was more than $92.7 billion and on average, annual trade misinvoicing is estimated at $2.25 billion. The gross revenue losses incurred to the national exchequer due to trade misinvoicing in the overall period was estimated at $21.2 billion with an annual average of $0.5 billion. Moreover, the total net loss was estimated to be $11 billion for the total period and annually the national exchequer is deprived of $0.26 billion in the form of the evasion of customs duties and exports withholding tax.

Suggested Citation

  • Qureshi, Tehseen Ahmed & Mahmood, Zafar, 2015. "The Size of Trade Misinvoicing in Pakistan," MPRA Paper 65801, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65801
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    File URL: https://mpra.ub.uni-muenchen.de/65801/1/MPRA_paper_65801.pdf
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    References listed on IDEAS

    as
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    5. Ila Patnaik & Abhijit Sen Gupta & Ajay Shah, 2012. "Determinants of Trade Misinvoicing," Open Economies Review, Springer, vol. 23(5), pages 891-910, November.
    6. Zafar Mahmood & Mohammad Azhar, 2001. "On Overinvoicing of Exports in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(3), pages 173-185.
    7. Zafar Mahmood, 2013. "Reverse Capital Flight to Pakistan: Analysis of Evidence," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 52(1), pages 1-15.
    8. Zafar Mahmood & Riaz Mahmood, 1993. "Under-invoicing of Imports: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 1141-1155.
    9. Yalta, A. Yasemin & Demir, Ishak, 2010. "The Extent of Trade Mis-Invoicing in Turkey: Did Post-1990 Policies Matter?," MPRA Paper 30186, University Library of Munich, Germany.
    10. Amit Biswas & Sugata Marjit, 2005. "Mis-invoicing and Trade Policy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 8(3), pages 189-205.
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    More about this item

    Keywords

    Trade Misinvoicing; Revenue Loss; Capital Flight; Reverse Capital Flight;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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