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A look offshore: unpacking the routes of misinvoicing in international trade

Author

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  • Catalin Dragomirescu-Gaina
  • Leandro Elia

Abstract

We study whether misinvoicing in international trade is reflected in cross-border bank accounts as reported by offshore financial centres. We show that residents hold more offshore wealth when local misinvoicing practices thrive, especially for under-invoiced exports of natural resources. These results are driven by less-developed countries, autocracies, and resource-rich countries, which typically lack institutional capacity and/or political willingness to deter capital flight and misinvoicing practices.

Suggested Citation

  • Catalin Dragomirescu-Gaina & Leandro Elia, 2022. "A look offshore: unpacking the routes of misinvoicing in international trade," WIDER Working Paper Series wp-2022-156, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2022-156
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    References listed on IDEAS

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    1. Menkhoff, Lukas & Miethe, Jakob, 2019. "Tax evasion in new disguise? Examining tax havens' international bank deposits," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 176, pages 53-78.
    2. Mehrotra, Rahul & Carbonnier, Gilles, 2021. "Abnormal pricing in international commodity trade: Empirical evidence from Switzerland," Resources Policy, Elsevier, vol. 74(C).
    3. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    4. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    5. Javier Garcia-Bernardo & Jan Fichtner & Eelke M. Heemskerk & Frank W. Takes, 2017. "Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network," Papers 1703.03016, arXiv.org, revised May 2017.
    6. Valeria Pellegrini & Alessandra Sanelli & Enrico Tosti, 2016. "What do external statistics tell us about undeclared assets held abroad and tax evasion?," Questioni di Economia e Finanza (Occasional Papers) 367, Bank of Italy, Economic Research and International Relations Area.
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    Cited by:

    1. Dragomirescu-Gaina, Catalin & Fassas, Athanasios P. & Philippas, Dionisis, 2024. "A Chinese clout on energy exports some countries cannot shake off," Energy Economics, Elsevier, vol. 134(C).
    2. Ndoricimpa, Arcade, 2024. "The ugly side of the Africa-UAE (United Arab Emirates) gold trade: Gold export misreporting and smuggling," Resources Policy, Elsevier, vol. 91(C).
    3. Arcade Ndoricimpa & Eduardo Araral, 2024. "Determinants of illicit capital movement in China‐Africa trade: Evidence of trade misinvoicing," African Development Review, African Development Bank, vol. 36(2), pages 334-349, June.

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