Determinants and pervasiveness of the evasion of customs duties
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Evasion of customs duties is a serious concern in developing countries, where
tariff receipts are often important, but their collection is often problematic. We study theoretically
and empirically the determinants of evasion across countries and products, based on a systematic
analysis of discrepancies in trade declarations - when available - for both partners. We conclude
that evasion of customs duties is greater in poorer countries, especially where the rule of law is
limited. The consequences are likely to be the most serious in the poorest countries, where we find
a one percentage point higher tariff to be associated on average with an understatement of imports
of 1% or more. We assess some policy remedies and conclude that automated customs data
treatment may be particularly useful.