Tax Evasion through Trade Intermediation
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World Bank, Washington, DC
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Many production firms use intermediary
trading firms to export indirectly. This paper uses Chinese
export data at the transaction level to investigate the tax
evasion motive through indirect trade. The paper provides
strong evidence that, under Chinas partial export
value-added tax rebate policy, production firms can
effectively evade value-added taxes by underreporting their
selling prices to domestic intermediary trading firms,
especially when they sell differentiated products. Even for
a moderate level of underreporting, the revenue loss is
close to one billion U.S. dollars. The paper also finds that
such underreporting behavior through domestic intermediaries
may be associated with cross-border evasion through
underreporting export values to foreign partners. In
addition, the results indicate that the evasion motive is
stronger for larger transactions.
Palabras clave
TAX INCENTIVES, TARIFFS, MICROSTRUCTURE, SUBSTITUTION, EQUIPMENT, CHECKS, ACCOUNTING, PRODUCTION, SALES, INTEREST, FINISHED PRODUCTS, GUARANTEES, EXPORT PERFORMANCE, EXCHANGE, LOCAL GOVERNMENTS, LIQUIDITY, TAX BENEFIT, EXPORTS, ELASTICITY, EXPORTERS, POLITICAL ECONOMY, MARKET SIZE, POSITIVE COEFFICIENT, WELFARE, HOMOGENEOUS GOODS, INCENTIVES, VARIABLES, PRICING, PRICE, TAX, INPUTS, OWNERSHIP, INCOME TAX, PRODUCT QUALITY, DUMPING, DUMMY VARIABLE, RESERVE, INTERNATIONAL BANK, DEVELOPING COUNTRY, RETAIL, BUDGET, FOREIGN MARKETS, SMALL BUSINESS, INFLUENCE, GLOBAL ECONOMY, DEVELOPMENT ECONOMICS, EXPORT GROWTH, CONTRACT ENFORCEMENT, RESERVE BANK, FOREIGN MARKET, REBATES, REBATE, CONTRACTS, FIXED COSTS, SURPLUS, PRODUCTS, TRADING, GLOBALIZATION, CRITERIA, MARKETS, WTO, RETURN, PUBLIC FINANCE, INTERNATIONAL ECONOMICS, PRODUCT, ELASTICITY OF SUBSTITUTION, INVENTORIES, FINANCE, TAXES, EXPENDITURE, DOUBLE TAXATION, TRANSACTIONS, EQUILIBRIUM ANALYSIS, EQUITY, TRANSACTION, BUDGET CONSTRAINT, FEDERAL RESERVE, VALUE ADDED, TAX RATE, FEDERAL RESERVE BANK, DOMESTIC MARKETS, INTERNATIONAL TRADE, OWNERSHIP STRUCTURE, FINANCIAL CRISIS, VALUE, COMPETITIVENESS, CREDIT, MIDDLEMAN, PRODUCT DIFFERENTIATION, EXCHANGES, EXPORT SHARES, EXPECTED VALUE, CONTRACT, ECONOMIES OF SCOPE, PRICE LEVEL, CONSUMERS, AGRICULTURE, ISSUANCE, PROPERTY, TAX RATES, AVERAGE PRICE, TRADE REGIMES, SHARES, DEFAULT, MARKET, BENCHMARK, TRADE LIBERALIZATION, ECONOMICS, EXPORTER, COMPARATIVE ECONOMICS, TAXATION, TRADE, GOODS, THEORY, GENERAL EQUILIBRIUM ANALYSIS, GROWTH RATE, BARTER, INVESTMENT, SHARE, TARIFF, PURCHASING, MARKET MICROSTRUCTURE, REVENUE, CHECK, WHOLESALERS, INSTRUMENT, PROFITS, LIABILITIES, TRADE REGIME, EXPORT SHARE, GUARANTEE, PRICES, ADVERSE SELECTION, DEVELOPMENT POLICY, MIDDLEMEN