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Date: April 29, 2024 Mon
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Results for tax evasion
79 results foundAuthor: Organisation for Economic Co-operation and Development. Committee on Fiscal Affairs Title: Report on Abuse of Charities for Money-Laundering and Tax Evasion Summary: Tax evasion and tax fraud through the abuse of charities is a serious and increasing risk in many countries although its impact is variable. Some countries estimate that the abuse of charities costs their treasury many hundreds of millions of dollars and is becoming more prevalent. This report summarizes the status attached to charities in the countries surveyed and compiles the common methods of the abuse of charities, the sectors at risk and the few attempts so far to quantify those risks. Details: Paris: Organisation for Economic Co-operation and Development, Centre for Tax Policy and Administration. 2008. 65p. Source: Internet Resource Year: 2008 Country: International URL: Shelf Number: 114341 Keywords: CharitiesCorrupt PracticesFraudMoney LaunderingTax Evasion |
Author: Oomes, Nienke Title: Diamond Smuggling and Taxation in Sub-Saharan Africa Summary: This paper provides an overview of diamond mining in sub-Saharan African countries, and explores the reasons for substantial differences in their tax rates and fiscal revenues from the sector, which mainly arise from differences in the incentives for smuggling. In a theoretical model, we show that optimal diamond tax rates increase with the degree of competition among diamond buyers, as well as with the corporate share of diamond production, which is confirmed by the data. We then discuss policies to increase revenue, including by enhancing mining productivity, stimulating the exploration of new areas, reducing barriers to entry, and attracting investment into value-adding downstream operations. Details: Washington, DC: International Monetary Fund, 2003. 23p. Source: Internet Resource; IMP Working Paper; WP/03/167 Year: 2003 Country: Africa URL: Shelf Number: 119558 Keywords: Diamond SmugglingTax Evasion |
Author: Kar, Dev Title: The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008 Summary: India's underground economy is closely tied to illicit financial outflows. The total present value of India's illicit assets held abroad ($462 billion) accounts for approximately 72 percent of India's underground economy. This means that almost three-quarters of the illicit assets comprising India's underground economy—which has been estimated to account for 50 percent of India's GDP (approximately $640 billion at the end of 2008)—ends up outside of the country. The finding that only 27.8 percent of India's illicit assets are held domestically support arguments that the desire to amass wealth illegally without attracting government attention is one of the primary motivations behind the cross-border transfer of illicit capital. In the post-reform period of 1991-2008, deregulation and trade liberalization accelerated the outflow of illicit money from the Indian economy. Opportunities for trade mispricing grew and expansion of the global shadow financial system—particularly island tax havens—accommodated the increased outflow of India's illicit capital flight. There is a statistical correlation between larger volumes of illicit flows and deteriorating income distribution. Tax evasion is a major component of the underground economy, which in turn is a primary driver of India's illicit outflows. Expanding India's tax base and improving tax collection has high potential to curtail illicit flows. Illicit financial flows cannot be curtailed without the collaborative effort of both developing and developed countries. Economic reforms key to stemming the outflow of illicit money from India and the developing world in general include: •curtail trade mispricing (a widely utilized tax avoidance technique of international businesses); •require country-by-country reporting of sales, profits and taxes paid by multinational corporations; •require confirmation of beneficial ownership in all banking and securities accounts; •require automatic cross-border exchange of tax information on personal and business accounts; and •harmonize predicate offenses under anti-money laundering laws across all countries that cooperate on the Financial Action Task Force. Details: Washington, DC: Global Financial Integrity, 2010. 73p. Source: Internet Resource: Accessed December 6, 2010 at: http://india.gfip.org/ Year: 2010 Country: India URL: http://india.gfip.org/ Shelf Number: 120391 Keywords: Financial CrimesMoney Laundering (India)Tax EvasionUnderground Economy |
Author: Blickman, Tom Title: Countering Illicit and Unregulated Money Flows: Money Laundering, Tax Evasion and Financial Regulation Summary: In July 1989, the leaders of the economic powers assembled at the G7 Paris summit decided to establish a Financial Action Task Force (FATF) to counter money laundering as an effective strategy against drug trafficking by criminal ‘cartels’. Here began an international anti-money laundering (AML) regime. Since then it has expanded its scope to fight transnational organized crime and counter the financing of terrorism. During that time other illicit or unregulated money flows have appeared on the international agenda as well. Today, tax evasion and avoidance, flight capital, transfer pricing and mispricing, and the proceeds of grand corruption are seen as perhaps more detrimental obstacles to good governance and the stability and integrity of the financial system. Other international bodies were tasked to tackle these ‘public bads’. Tackling tax evasion is still in its infancy, and there is a growing awareness that the AML regime is not working as well as intended. Experts still ponder how to implement one that works. Tax havens and offshore financial centres (OFCs) were identified as facilitating these unregulated and illicit money flows. The 2007-2008 credit crisis made only too clear the major systemic risk for all global finance posed by the secrecy provided by tax havens and OFCs. They were used to circumvent prudential regulatory requirements for banks and other financial institutions and hide substantial risks from onshore regulators. After twenty years of failed efforts, the G20 (having supplanted the G7) has again pledged to bring illicit and harmful unregulated money flows under control. This briefing looks at previous attempts to do so and the difficulties encountered along the way. Can the G20 succeed or is it merely following the same path that led to inadequate measures? What are the lessons to be learned and are bolder initiatives required? In brief, the paper concludes that current initiatives have reached their sale-by date and that a bolder initiative is required at the UN level, moving from recommendations to obligations, and fully engaging developing nations, at present left out in the current ‘club’-oriented process. Details: Amsterdam: Transnational Institute, 2009. 39p. Source: Internet Resource: Crime and Globalisation Debate Papers: Accessed February 10, 2011 at: http://www.idpc.net/sites/default/files/library/Countering%20illicit%20and%20unregulated%20money%20flows.pdf Year: 2009 Country: International URL: http://www.idpc.net/sites/default/files/library/Countering%20illicit%20and%20unregulated%20money%20flows.pdf Shelf Number: 118152 Keywords: CartelsFinancial CrimesMoney LaunderingOrganized CrimeTax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries: 2002-2006 Summary: This report shows that the developing world is losing an increasing amount of money through illicit capital flight each year. Moreover, the value of the illicit flows surpasses the amount of Official Development Assistance entering those countries by an order of magnitude. "Illicit financial flows siphon revenue out of poor countries, robbing them of much-needed assets and forestalling economic development,” said GFI director Raymond Baker. “These new figures reveal that illicit financial flows outpace Official Development Assistance by a ratio of nearly 10 to 1. This is critical to understanding global poverty and developing effective poverty alleviation and economic development strategies,” Baker said. Primary findings of the report include: Total capital flight exiting the developing world may be as much as $1 trillion dollars per year; Measured against the flow of Official Development Assistance in 2006 poor countries, in aggregate, are losing close to $10 dollars for every $1 dollar they receive in aid; The volume of capital flight from developing countries is increasing at an average of 18.5% a year. Over the five-year period of this study, illicit financial flows grew at the fastest pace in the Middle East and North Africa region (49.4 percent) followed by Europe (25.4 percent), Asia (15.7 percent), and the Western Hemisphere (2.8 percent). Illicit financial flows from Africa actually declined (-2.9 percent) but this decline is more the result of incomplete data than supportive economic or political factors. Illicit financial flows refer to money that is illegal in its origin, transfer or use and reflect the proceeds of corruption, crime and tax evasion. Corporate avoidance of customs duties, VAT and income taxes constitute an estimated 60% of the total outflow. The study utilized multiple economic models which were combined and “tested” to determine the most reliable estimates. The findings were based on macroeconomic trade and external debt data maintained by the International Monetary Fund and the World Bank. Details: Washington, DC: Global Financial Integrity, 2008. 45p. Source: Internet Resource: Accessed February 11, 2011 at: http://www.gfip.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf Year: 2008 Country: International URL: http://www.gfip.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf Shelf Number: 120746 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsTax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries: 2000-2009, Update with a Focus on Asia Summary: The report, “Illicit Financial Flows from Developing Countries: 2000-2009,” finds that approximately $6.5 trillion was removed from the developing world from 2000 through 2008. The report also examines illicit flows from Asia, which produced the largest portion of total outflows and makes projections for 2009. The report ranks countries according to magnitude of outflows with China ranking 1 ($2.18 trillion), Russia 2 ($427 billion), Mexico 3 ($416 billion), Saudi Arabia 4 ($302 billion), and Malaysia 5 ($291 billion). The report also shows the annual outflows for each country and breaks outflows down into two categories of drivers: trade mispricing and “other,” which includes kickbacks, bribes, embezzlement, and other forms of official corruption. The report also looks at the impact of the global economic recession—on both magnitudes and trends in illicit outflows, it makes policy recommendations, and it projects outflows for 2009 (for which complete data is not yet available). Details: Washington, DC: Global Financial Integrity, 2011. 64p. Source: Internet Resource: Accessed February 11, 2011 at: http://www.gfip.org/storage/gfip/documents/reports/IFF2010/gfi_iff_update_report-web.pdf Year: 2011 Country: International URL: http://www.gfip.org/storage/gfip/documents/reports/IFF2010/gfi_iff_update_report-web.pdf Shelf Number: 120748 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: U.S. Government Accountability Office Title: Illicit Tobacco: Various Schemes Are Used to Evade Taxes and Fees Summary: Tobacco products face varying levels of taxation in different locations, creating opportunities and incentives for illicit trade. Cigarettes are taxed at the federal, state, and in some cases, local levels. According to industry representatives, taxes and other fees make up significant components of the final price of cigarettes, averaging 53 percent of the retail price. While the national average retail price of a pack of cigarettes was $5.95 in 2010, in New York City, a pack can cost up to $13.00 or more due to high combined state and city taxes. In contrast, a pack of cigarettes in Richmond, Virginia, can cost approximately $5.00, due to low state cigarette taxes there. The tax differential between a case of cigarettes (typically containing 12,000 cigarettes) in New York City and Richmond is over $3,000, creating incentives for illicit trade and profits. Excise taxes and other fees on tobacco products can be evaded at numerous points in the supply chain. Law enforcement officials told us another incentive to engage in this activity is the fact illicit tobacco penalties are comparatively less severe than other forms of illicit trade. According to experts we spoke with and literature we reviewed, a wide range of schemes are used by different actors to profit from illicit trade in tobacco products, mainly through the evasion of taxes. Schemes can range from individual consumers purchasing tax-free cigarettes from Internet Web sites, to larger-scale interstate trafficking of tobacco products, to smuggling cigarettes into the country by criminal organizations. For example: (1) A California distributor purchased approximately $1.4 million in other tobacco products (e.g., cigars and chewing tobacco) from an out-ofstate distributor, who disguised the shipments using falsified documents and black plastic wrapping. The California distributor then sold it to customers and failed to pay state excise taxes. (2) A criminal organization attempted to conceal two containers of counterfeit cigarettes and pass them through Customs at the Los Angeles/Long Beach port by declaring them as toys and plastic goods. (3) A manufacturer evaded Tobacco Master Settlement Agreement (MSA) escrow payments. The manufacturer underreported its cross-border sales to numerous states, including Virginia. By underreporting its sales to Virginia, the manufacturer evaded approximately $580,000 in escrow payments. Law enforcement officials reported that patterns of schemes are dynamic and identified links between illicit trade in tobacco and other crimes. Details: Washington, DC: GAO, 2011. 27p. Source: Internet Resource: GAO-11-313: Accessed March 8, 2011 at: http://www.gao.gov/new.items/d11313.pdf Year: 2011 Country: United States URL: http://www.gao.gov/new.items/d11313.pdf Shelf Number: 120888 Keywords: Illegal TradeSmugglingTax EvasionTobacco |
Author: Lefebvre, Mathieu Title: Tax Evasion, Welfare Fraud, and "The Broken Windows" Effect: An Experiment in Belgium, France and the Netherlands Summary: In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others' behavior. Subjects have to decide between a 'registered' income, the realization of which will be known to the tax authority for sure, and an 'unregistered' income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on whether reporting their income or not, knowing the risk of detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment; (ii) many subjects choose an option that allows for tax evasion or welfare fraud but report their income honestly anyway; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence; (iv) tax evasion is more frequent in France and the Netherlands; Walloons evade taxes less than the Flemish. There is no cross-country difference in welfare dodging. Details: Munich: CESifo Group, 2011. 49p. Source: Internet Resource: CESIFO WORKING PAPER NO. 3408: Accessed April 14, 2011 at: http://www.cesifo-group.de/portal/pls/portal/docs/1/1200211.PDF Year: 2011 Country: Europe URL: http://www.cesifo-group.de/portal/pls/portal/docs/1/1200211.PDF Shelf Number: 121354 Keywords: Tax EvasionWelfare Fraud |
Author: Caulkins, Jonathan P. Title: Smuggling and Excise Tax Evasion for Legalized Marijuana: Lessons from Other Excise Taxes Summary: We explore three lines of evidence that may shed light on whether marijuana excise tax revenue could be threatened by black market sales and smuggling: (1) Comparing the Ammiano Bill’s proposed $50 per ounce tax to various other current and proposed excise taxes on a variety of metrics, (2) Placing a $50 per ounce tax in the context of cross-sectional state-level data relating tobacco smuggling to tobacco excise taxes, and (3) Comparing the tax to current marijuana prices on a per pound basis. This exercise suggests that: As compared with other familiar excise taxes, a $50 per ounce excise tax on marijuana is either very high or truly unprecedented depending on the metric employed. California should expect at least some degree of tax evasion; it is hard to see why evasion would be less of an issue than it is with cigarettes. California should not rule out the possibility that tax evasion would wipe out essentially all of the potential revenues from a $50 per ounce excise tax. Details: Santa Monica, CA: RAND Drug Policy Research Center, 2010. 10p. Source: Internet Resource: Working Paper 766-RC, 2010. 10p. Year: 2010 Country: United States URL: Shelf Number: 121357 Keywords: Drug LegalizationDrug PolicyMarijuana (California)SmugglingTax Evasion |
Author: Australian Crime Commission Title: Organised Crime in Australia 2011 Summary: The Organised Crime in Australia 2011 report is the third and largest report of its kind that the Australian Crime Commission has produced since 2008. The latest edition provides the most comprehensive unclassified profile of organised crime in Australia, including the characteristics of those involved, what drives them, the activities they are involved in and the extent and impact of organised crime. Most organised criminal activities in Australia are focused on illicit drug markets, although organised crime groups also engage in a wide variety of associated criminal activity including tax evasion, money laundering, fraud, identity crime and high tech crime. The impact of organised crime in Australia is serious and far exceeds the direct harm caused by the specific offences. In fact, the activities of high-threat serious and organised criminal enterprises result in significant harm to the Australian community. There are significant losses to the economy, including the redirection of resources that might otherwise be invested in legitimate business, reductions in tax revenue and increasing costs of law enforcement and regulation. The widespread impact extends to costs associated with longer-term health and social harm. The activities of organised criminal enterprises can also undermine public confidence in the integrity of key business sectors and government institutions. Details: Canberra: Australian Crime Commission, 2011. 103p. Source: Internet Resource: Accessed April 21, 2011 at: http://www.crimecommission.gov.au/publications/oca/_files/2011/oca2011.pdf Year: 2011 Country: Australia URL: http://www.crimecommission.gov.au/publications/oca/_files/2011/oca2011.pdf Shelf Number: 121465 Keywords: Drug MarketsDrug TraffickingFraudIdentity TheftMoney LaunderingOrganized Crime (Australia)Tax Evasion |
Author: Kubo, Koji Title: Smuggling and Import Duties in Myanmar Summary: This paper examines the effects of import duties on smuggling in Myanmar. Following Fisman and Wei (2004), the reporting discrepancies between Myanmar's imports records and corresponding exports recorded by trading partners are regarded as indicative of smuggling. The paper studies whether reporting discrepancies differ across trading partners as well as across time. Our main findings are first, that the hike in import duties in June 2004 helped to widen the reporting discrepancies, which suggests smuggling for tax evasion purposes and second, that reporting discrepancies differ considerably across trading partners: land borders appear to be particularly attractive venues for smugglers. Details: Chiba, Japan: Institute of Developing Economies, 2010. 25p. Source: Internet Resource: IDE Discussion Paper No. 258: Accessed April 26, 2011 at: http://ir.ide.go.jp/dspace/bitstream/2344/920/1/ARRIDE_Discussion_No.258_kubo.pdf Year: 2010 Country: Burma URL: http://ir.ide.go.jp/dspace/bitstream/2344/920/1/ARRIDE_Discussion_No.258_kubo.pdf Shelf Number: 121495 Keywords: Border SecuritySmuggling (Myanmar, Burma)Tax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from the Least Developed Countries: 1990–2008 Summary: This paper explores the scale and composition of illicit financial flows from the 48 Least Developed Countries (LDCs). Illicit financial flows involve the cross-border transfer of the proceeds of corruption, trade in contraband goods, criminal activities and tax evasion. In recent years, considerable interest has arisen over the extent to which such flows may have a detrimental impact on development and governance in both developed and developing countries alike. This issue has been recognised by the UN as important for development and achievement of the Millennium Development Goals (MDGs). Illicit capital flight, where it occurs, is a major hindrance to the mobilisation of domestic resources for development. In many cases, it significantly reduces the volume of resources available for investment in the MDGs and productive capacities. Through the United Nations, the international community has committed to strengthen national and multilateral efforts to address it. As the deadline for achievement of the MDGs draws closer, it is vital understand more about the nature of this problem and to explore possible policy solutions, especially for those countries furthest off-track towards the MDGs. The study’s indicative results find that illicit financial flows from the LDCs have increased from US$9.7 billion in 1990 to US$26.3 billion in 2008 implying an inflation-adjusted rate of increase of 6.2 percent per annum. Conservative (lower-bound) estimates indicate that illicit flows have increased from US$7.9 billion in 1990 to US$20.2 billion in 2008. The top ten exporters of illicit capital account for 63 percent of total outflows from the LDCs while the top 20 account for nearly 83 percent. Trade mispricing accounts for the bulk (65-70 percent) of illicit outflows from the LDCs, and the propensity for mispricing has increased along with increasing external trade. Empirical research on illicit flows indicates that there are three types of factors driving illicit flows—macroeconomic, structural, and governance-related. The ratio of illicit outflows to Gross Domestic Product (GDP) averages about 4.8 percent but there is wide variation among LDCs. Of the top 10 countries with the highest illicit flows to GDP ratio, four are small island countries, two are landlocked, and four are neither. In some LDCs, losses through illicit capital flows outpace monies received in official development assistance (ODA). Estimating illicit flows from some LDCs is problematic because the underlying macroeconomic or partner-country trade data are either non-existent or spotty due to widespread on-going or recent conflict and/or weak statistical capacity. Complete macroeconomic and partner-country trade data were available for 34 LDCs, while 11 report partial data to the IMF and 3 are nonreporters. The report thus presents an estimate of illicit flows from some of the non-reporting and partially reporting countries based on the assumption that illicit flows from these countries are in the same proportion to GDP as are outflows from other reporting LDCs with complete data. The results of this study are indicative but demonstrate a clear need for further research in this area given the scale of the development challenges which currently face the Least Developed Countries and the need to ‘think outside the box’ and find innovative development solutions. The paper presents a number of useful measures LDCs may wish to consider to curtail the generation and transmission of illicit financial flows. The international community must also play its part. However, even where policy measures are well designed and targeted, lasting improvements in this area can only be achieved when there is the sufficient political will and leadership to tackle corruption and some of the root causes of illicit financial flows. For the Least Developed Countries, policy recommendations include measures to address trade mispricing through for instance systematic customs reform and the adoption of transfer pricing regulations with commensurate increase in enforcement capacity. The implementation of specialised software which helps governments to identify possible incidences of transfer pricing may also be useful to some governments. Measures to reform the tax base through the progressive strengthening and widening of the tax base in order to reduce dependence on indirect taxes which are more difficult to manage and have built-in incentives for tax evasion may also be beneficial. Ultimately tax is the most sustainable source of finance for development and the long-term goal of poor countries must be to replace foreign aid dependency with tax self-sufficiency. However taxation reform must be seen as equitable and fair and must not unduly burden the poorest. The international community must also support LDCs’ efforts to curtail the illicit outflow of capital. This includes specific measures to support LDCs to improve the systematic exchange of tax information between governments on non-resident individuals and corporations while the adoption of globally consistent regulations for transfer pricing could encourage multinational companies to modify their behaviour towards more transparency and accountability. The UN’s Model Income Tax Treaty refers to the importance of automatic exchange of information between national tax authorities in different jurisdictions. In order to stem tax avoidance by multinational corporations, the international community could support the development of an international accounting standard requiring that all multi-national corporations report sales, profits, and taxes paid in all jurisdictions in their audited annual reports and tax returns. Details: New York: United Nations Development Programme, 2011. 68p. Source: Internet Resource: Accessed May 19, 2011 at: http://www.gfip.org/ Year: 2011 Country: International URL: http://www.gfip.org/ Shelf Number: 121767 Keywords: CorruptionFinancial CrimesIllicit TradeMoney LaunderingTax Evasion |
Author: Kemal, M. Ali Title: A Fresh Assessment of the Underground Economy and Tax Evasion in Pakistan: Causes, Consequences, and Linkages with the Formal Economy Summary: Rise in the underground economy creates problems for the policy-makers to formulate economic policies, especially the monetary and fiscal policies. It is found that if there was no tax evasion, budgets balance might have been zero and positive for some years and we would not have needed to borrow as much as we had borrowed. It is concluded that the impact of the underground economy is significant to the movements of the formal economy, but the impact of formal economy is insignificant in explaining the movements in the underground economy. In the long run, underground economy and official economy are positively associated. It is estimated that the underground economy ranges between Rs 2.91 trillion and Rs 3.34 trillion (54.6 percent of GDP to 62.8 percent of GDP respectively) in 2005 and tax evasion ranges between Rs 302 billion and Rs 347 billion (5.7 percent of GDP to 6.5 percent of GDP respectively) in 2005. Underground economy and tax evasion were increasing very rapidly in the early 1980s but the rate of increase accelerated in the 1990s. It declined in 1999, but reverted to an increasing trend until 2003. It declined again in 2004 and 2005. Details: Islamabad: Pakistan Institute of Development Economics, 2007. 37p. Source: Internet Resource: Accessed November 5, 2011 at: http://www.pide.org.pk/pdf/Working%20Paper/Working%20Paper%20No.%2013.pdf Year: 2007 Country: Pakistan URL: http://www.pide.org.pk/pdf/Working%20Paper/Working%20Paper%20No.%2013.pdf Shelf Number: 123236 Keywords: Tax EvasionUnderground Economy (Pakistan) |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries Over the Decade Ending 2009 Summary: This report provides estimates of illicit financial flows (IFFs) from developing countries over the decade 2000-2009 based on balance of payments (BoP), bilateral trade, and external debt data reported by member countries to the IMF and the World Bank. It should be noted that estimates of IFFs at the developing world, regional, and country levels presented in this report could differ from those published in the 2010 report due to revisions to underlying data, reported by member countries. The most notable finding in this report is that in 2009 IFFs from developing countries, led by the top ten exporters of illicit capital, most of which are in Asia and the Middle East and North Africa (MENA) region, have declined by 41 percent over the last year. Principal components analysis seems to indicate that this decline was the result of the global economic crisis which tended to reduce the source of funds (new external loans and net foreign direct investments), increase the use of funds and reduce trade mispricing due to lower trading volumes. We find no reason to subscribe the wide-ranging reduction in IFFs to far-reaching economic reform or improvements in overall governance in major emerging markets. Details: Washington, DC: Global Financial Integrity, 2011. 100p. Source: Internet Resource: Accessed January 17, 2012 at: http://www.ciponline.org/images/uploads/publications/illicit_financial_flows_from_developing_countries_over_the_decade_ending_2009.pdf Year: 2011 Country: International URL: http://www.ciponline.org/images/uploads/publications/illicit_financial_flows_from_developing_countries_over_the_decade_ending_2009.pdf Shelf Number: 123640 Keywords: Corrupt PracticesFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Council of Europe. Parliamentary Assembly. Committee on Economic Affairs and Development Title: The Underground Economy: A Threat to Democracy, Development and the Rule of Law Summary: The underground economy represents a large and growing share of the overall economic activity in Europe and beyond. It accounts for from about 10% to over 60% of gross domestic product in different European countries. The “new democracies” of central and eastern Europe – where the rule of law is more fragile and where vested interest groups are firmly rooted – are particularly affected. The evolving structure of the world economy, the geopolitical changes following the fall of the Berlin Wall and the global economic crisis have all fuelled the growth of the informal economy. The report stresses that the underground economy and its extreme form – economic crime – significantly erode state authority and the capacity for good governance which are essential for fostering democracy, development and the rule of law. These phenomena also deprive state budgets of much tax revenue, distort competition, flout citizens' socio-economic rights, slow down economic progress, abuse public welfare systems and propagate lawlessness. The reports considers that the Council of Europe should pay more attention to addressing the problem of undeclared work, study more closely the activities of offshore centres as financial intermediaries and review the situation of organised crime in its member states. It proposes a series of directions for action, ranging from evaluation measures, regulatory adjustments, electronic surveillance of money flows, use of economic intelligence to information exchange, whistle-blowing and witness protection. Details: Strasbourg Cedex: Council of Europe, 2011. 14p. Source: Internet Resource: Doc. 12700: Accessed January 23, 2012 at: http://assembly.coe.int/Documents/WorkingDocs/Doc11/EDOC12700.pdf Year: 2011 Country: Europe URL: http://assembly.coe.int/Documents/WorkingDocs/Doc11/EDOC12700.pdf Shelf Number: 123735 Keywords: Counterfeit GoodsEconomic CrimesTax EvasionUnderground Economy (Europe)Whistleblowing |
Author: Yikona, Stuart Title: Ill-gotten Money and the Economy: Experiences from Malawi and Namibia Summary: Over the last 20 years, the international community has significantly stepped up its efforts to prevent, detect, and deter money flows related to criminal activities and terrorism financing. Since the early 2000s, this drive has extended to developing countries, with most of them introducing anti-money laundering (AML) policies. The primary driver behind this is law enforcement; these policies are aimed at detecting and tracing flows of ill-gotten money, which would enable authorities to fight and prevent crime and recover assets of crime, corruption, and tax evasion. Insufficient attention has been paid to the economic side of ill-gotten money and the efforts to combat such flows, particularly in developing countries. Why is it critical for them, and what is the case for combating the flows of ill-gotten money in countries severely constrained by a lack of resources and limited technical capacity to implement a full AML-framework? Moreover, why are ill-gotten proceeds relevant to the issue of economic development? What is the magnitude of the ill-gotten money flows from activities that generate such flows? Added to this are concerns that anti-money laundering policies may at times actually jeopardize certain development objectives, such as access to finance for poor people. The core objective of this study is to introduce economics into the international debate about anti-money laundering, and to introduce the idea of the usefulness and effectiveness of such policies. We also hope that we might be able to bridge the gap between the law enforcement and economist communities. Indeed, the 2011 World Development Report (WDR) on conflict, security, and development provides us with a critical framework to think through the link between organized crime and development from an economic perspective. The study focuses on two developing countries: Malawi, a low-income country, and Namibia, a middle-income country. The central questions asked are: Why are “proceeds of crime” relevant for economic development? Do “proceeds of crime” and related policy responses help or harm economic development? One critical step in such analysis is to obtain a better understanding of the magnitude of the domestic or cross-border sources of ill-gotten money in a country: how it is recycled through the economy and across its borders or spent and invested. Only then is it possible to discuss the economic effects of the circulation and allocation of ill-gotten money in developing countries and the economic impact of the underlying activities. While not intended to be exhaustive or definitive, this study is meant to contribute to a better understanding and quantification of the issues relevant to the proceeds of crime and economic development. For practical and operational purposes, and to be grounded in country specifics, this study only focuses on Malawi and Namibia. However, it is hoped that the approach developed in this study will be useful to other developing-country governments in identifying the main sources and magnitude of the flows of ill-gotten money, and the main recycling patterns and their effects on the economy. Such a framework will help governments in developing countries to systematically analyze the potential impact of AML and design and prioritize AML policies. The findings presented in this study are based on an extensive literature research; World Bank discussions with numerous public- and private-sector officials and representatives of the Governments of Malawi and Namibia during a Bank mission in November 2010; and workshops conducted in both countries in February 2011 to obtain feedback on the preliminary findings. In conducting this study, the team adopted an interactive approach. This was critical because mobilization of local expertise is essential not only in establishing a complete picture of current and future AML challenges, but also in designing policy considerations that subsequently are widely supported. Details: Washington, DC: The World Bank, 2012. 114p. Source: Internet Resource: Accessed February 14, 2012 at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/10/31/000386194_20111031015900/Rendered/PDF/651760PUB0EPI100money09780821388877.pdf Year: 2012 Country: Africa URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/10/31/000386194_20111031015900/Rendered/PDF/651760PUB0EPI100money09780821388877.pdf Shelf Number: 124132 Keywords: CorruptionEconomic DevelopmentEconomics and CrimeFinancial CrimesMoney Laundering (Malawi, Namibia)Organized CrimeProceeds of crimeTax Evasion |
Author: LeBillon, Philippe Title: Extractive Sectors and Illicit Financial Flows: What Role for Revenue Governance Initiatives? Summary: Countries highly dependent on natural resources are among the most severely affected by the problem of illicit financial flows. Despite a lack of definite studies proving the correlation between higher dependency on natural resources and higher levels of illicit flows, there are grounds to believe extractive industries’ revenues provide a large contribution to these flows. Most existing initiatives to address governance issues in extractive sectors have not been designed with the problem of illicit financial flows in mind. They have generally contributed to increased levels of transparency in the sector but have not significantly influenced the likelihood that revenues from natural resources will be misappropriated and illicitly transferred. But extractive industries initiatives can be improved in this regard, and development aid, along with other stakeholders, can help. Among other priorities, transparency initiatives should demand higher disaggregation of information disclosed by extractive companies and host governments. Transparency requirements should extend beyond revenues to licensing, contracts, physical resource flows, and other production factors, as well as to public expenditure. Extractives transparency initiatives also need to integrate elements of the tax justice and tax evasion agendas in order to expand their relevance to the effort to reduce illicit financial flows. Details: Bergen: Chr. Michelsen Institute (U4 Issue 2011:13) 41 p. Source: Internet Resource: Accessed February 29, 2012 at: http://www.u4.no/publications/extractive-sectors-and-illicit-financial-flows-what-role-for-revenue-governance-initiatives/ Year: 0 Country: International URL: http://www.u4.no/publications/extractive-sectors-and-illicit-financial-flows-what-role-for-revenue-governance-initiatives/ Shelf Number: 124321 Keywords: Financial CrimesNatural ResourcesOffenses Against the EnvironmentTax Evasion |
Author: Katz, Barbara G. Title: The Crime of Tax Evasion in Transition Economies Summary: Frequent government changes, often bringing reversals in ideological orientations, forced agents in economies in transition to make economic decisions without knowing whether their next government would be more or less benevolent, democratic, corrupt, or able and willing to pursue economic growth. We present a model of agents facing the uncertainty of two future forms of government, who are able to insure against this uncertainty by opting out of the legal part of the economy. They opt out through a criminal act, specifically, hiding funds from taxation. In order to choose whether or not to steal, agents need to know what each government would do should it come to power. But each government, before it could make its decision, would need to know the choices of the agents who would, for example, produce tax revenues. This informational tension is resolved endogenously. We derive the resulting crime level in society and the optimal choices made by the potential governments. We examine how changes in governmental structure would affect the crime level, and how that, in turn, would affect capital flight. Details: New York: Stern School of Business, New York University, 2011. 31p. Source: Internet Resource: Accessed March 14, 2012 at http://web-docs.stern.nyu.edu/old_web/economics/docs/workingpapers/2011/wp%201-18-11%20katz.pdf Year: 2011 Country: International URL: http://web-docs.stern.nyu.edu/old_web/economics/docs/workingpapers/2011/wp%201-18-11%20katz.pdf Shelf Number: 124540 Keywords: International CrimeTax Evasion |
Author: Lovenheim, Michael F. Title: How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling Summary: This paper uses micro-data on cigarette consumption from four waves of the CPS Tobacco Supplement to estimate cigarette demand models that incorporate the decision of whether to smuggle cigarettes across a state or Native American Reservation border. I ¯nd demand elasticities with respect to the home state price are indistinguishable from zero on average and vary signi¯cantly with the distance individuals live to a lower-price border. However, when smuggling incentives are eradicated, the price elasticity is negative, though still inelastic. I also estimate cross-border sales cause a modest increase in consumption, and between 13 and 25 percent of consumers purchase cigarettes in border localities in the CPS sample. The central implication of this study is, while cigarette taxes are ine®ective at achieving the goals for which they were levied in many states, there are signi¯cant potential gains from price increases that are confounded by cross-border sales. Details: Stanford, CA: Stanford Institute for Economic Policy Research, Stanford University, 2007. 53p. Source: Internet Resource: SIEPR Discussion Paper No. 06-40: Accessed May 10, 2012 at: http://www-siepr.stanford.edu/papers/pdf/06-40.pdf Year: 2007 Country: United States URL: http://www-siepr.stanford.edu/papers/pdf/06-40.pdf Shelf Number: 125240 Keywords: Cigarette SmugglingIllicit TobaccoTax Evasion |
Author: Chiou, Lesley Title: Crossing the Line: The Effect of Cross Border Cigarette Sales on State Excise Tax Revenues Summary: Differences in excise tax rates across jurisdictions create incentives for consumers to cross the border and purchase in lower-tax jurisdictions. This paper introduces a discrete choice model to examine tax avoidance and state border-crossing in the market for cigarettes. We exploit a rich dataset of consumer location choices and demographics to estimate a consumer’s tradeoff between distance and price when choosing a location to maximize utility. Using the estimates from our location and demand models, we reconsider a recent public policy issue among states and simulate tax avoidance under alternative cigarette excise tax levels. Details: Cambridge, MA: John F. Kennedy School of Government, Harvard University., 2008. 30p. Source: Internet Resource: Accessed May 14, 2012 at: http://www.hks.harvard.edu/fs/emuehle/Research%20WP/Chiou%20and%20Muehlegger_Feb08.pdf Year: 2008 Country: United States URL: http://www.hks.harvard.edu/fs/emuehle/Research%20WP/Chiou%20and%20Muehlegger_Feb08.pdf Shelf Number: 125264 Keywords: CigarettesTax EvasionTobacco Products |
Author: Schneider, Friedrich Title: The Shadow Economy and Work in the Shadow: What Do We (Not) Know? Summary: In this paper the main focus lies on the shadow economy and on work in the shadow in OECD, developing and transition countries. Besides informal employment in the rural and non-rural sector also other measures of informal employment like the share of employees not covered by social security, own account workers or unpaid family workers are shown. The most influential factors on the shadow economy and/or shadow labor force are tax policies and state regulation, which, if they rise, increase both. Furthermore the discussion of the recent micro studies underline that economic opportunities, the overall burden of the state (taxes and regulations), the general situation on the labor market, and unemployment are crucial for an understanding of the dynamics of the shadow economy and especially the shadow labor force. Details: Bonn, Germany: IZA, 2012. 73p. Source: IZA Discussion Paper No. 6423: Internet Resource: Accessed October 14, 2012 at http://ftp.iza.org/dp6423.pdf Year: 2012 Country: International URL: http://ftp.iza.org/dp6423.pdf Shelf Number: 126696 Keywords: Crime and EconomicsTax EvasionUnderground EconomyUnderground Markets |
Author: Kar, Dev Title: Illicit Financial Flows from China and the Role of Trade Misinvoicing Summary: The Chinese economy hemorrhaged US$3.79 trillion in illicit financial outflows from 2000 through 2011, according to a new report [PDF] released today by Global Financial Integrity (GFI), a Washington, DC-based research and advocacy organization. Amidst increased domestic concern over inequality and corruption, GFI’s study raises serious questions about the stability of the Chinese economy merely two weeks before the once-in-a-decade leadership transition. The research, conducted by GFI Lead Economist Dev Kar and GFI Economist Sarah Freitas, found that the illegal outflows—the proceeds of crime, corruption, and tax evasion—were largely due to a trade-based money laundering technique known as ‘trade misinvoicing ,’ which accounted for US$3.2 trillion, or 86.2%, of the total outflow of illegal capital over the 11 years studied. The trade misinvoicing figures were provided exclusively to The Economist, and appear in the latest edition of the magazine which hits newsstands tomorrow. Details: Washington, DC: Global Financial Integrity, 2012. 26p. Source: Internet Resource: Accessed December 17, 2012 at http://www.gfintegrity.org/storage/gfip/documents/reports/ChinaOct2012/gfi-china-oct2012-report-web.pdf Year: 2012 Country: International URL: http://www.gfintegrity.org/storage/gfip/documents/reports/ChinaOct2012/gfi-china-oct2012-report-web.pdf Shelf Number: 127237 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries: 2001-2010 Summary: The developing world lost US$859 billion in illicit outflows in 2010, an increase of 11% over 2009. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity. The report finds that illicit financial flows. From 2001 to 2010, developing countries lost US$5.86 trillion to illicit outflows. Conservatively estimated, illicit financial flows have increased in every region of developing countries. Real growth of illicit flows by regions over study period is as follows: •Africa 23.8 percent, •Middle East and North Africa (MENA) 26.3 percent, •developing Europe 3.6 percent, •Asia 7.8 percent, and •Western Hemisphere 2.7 percent. Top 10 countries with the highest measured cumulative illicit financial outflows between 2001 and 2010 were: 1.China: US$2.74 trillion 2.Mexico: US$476 billion 3.Malaysia: US$285 billon 4.Saudi Arabia: US$210 billion 5.Russia: US$152 billion 6.Philippines: US$138 billion 7.Nigeria: US$129 billion 8.India: US$123 billion 9.Indonesia: US$109 billion 10.United Arab Emirates: US$107 billion. Details: Washington, DC: Global Financial Integrity, 2012. Source: Internet Resource: accessed February 7, 2013 at: http://iff.gfintegrity.org/iff2012/2012report.html Year: 2012 Country: International URL: http://iff.gfintegrity.org/iff2012/2012report.html Shelf Number: 127521 Keywords: CorruptionDrug TraffickingFinancial CrimesMoney LaunderingOrganized CrimeTax Evasion |
Author: Virginia. State Crime Commission Title: Illegal Cigarette Trafficking (SJR 21, 2012) Summary: During the 2012 Regular Session of the Virginia General Assembly, Senate Joint Resolution 21 was enacted, which directed the Crime Commission to study and report on a number of topics involving the subject of illegal cigarette trafficking. The Commission was mandated to determine: why illegal cigarette trafficking occurs, the methods and strategies used by traffickers, the beneficiaries of trafficking, the health implications of non-regulated cigarettes, methods used to counterfeit cigarettes and tax stamps, potential uses of information technology to prevent cigarette trafficking, and statutory options that Virginia could adopt to combat the problem. All cigarette trafficking schemes, regardless of the scope of the operation or the methods employed, depend upon tax avoidance to generate illegal profits. Traffickers exploit differences in tax rates between different jurisdictions or geographic locations, purchasing cigarettes in one area and then illegally transporting them to another area where the tax rates are higher. The difference in the tax rates creates the profit for the trafficker, who is also able to sell his cigarettes at lower than market prices. The lower prices, in turn, provide an incentive for retailers and consumers to purchase these black market cigarettes. Retail merchants who purchase trafficked cigarettes gain an unfair economic advantage over their competitors, due to the lower prices they can offer customers. The customers, in turn, may be unaware that these low-cost cigarettes are black market items, and may simply think they have found a great bargain. Cigarette trafficking can occur at all points along the normal production and distribution channels, with cigarettes being diverted outside normal commercial streams and into the black market. Manufacturers can produce “off the book” cigarettes, failing to pay the taxes on them. Wholesalers can similarly falsify records, under-reporting the quantities of cigarettes purchased and then re-sold. Retailers can sell some or all of their cigarettes “off the books,” thereby avoiding the payment of sales tax. And, individuals can purchase large quantities of cigarettes in one area, at the retail or wholesale level, and then transport them to another area or state, a process sometimes referred to as “smurfing.” When individuals purchase their cigarettes at the wholesale level, sometimes creating fictional retail businesses to do so, they deprive the state of tax revenue. When this occurs, not one, but two states are made the victims of tax evasion—the state where the cigarettes were purchased, and the state where the cigarettes were transported. To achieve lower costs, traffickers can arrange for their cigarettes to be manufactured overseas. Frequently, these cigarettes are counterfeits. The packaging used in popular brands of cigarettes is duplicated; however, the cigarettes inside will differ substantially from the genuine articles. A number of recent studies have reported that the manufacturing facilities used in the production of counterfeit cigarettes have little or no quality control; the counterfeit cigarettes, in turn, have alarmingly high levels of contaminants, including dangerous levels of toxic metals. In short, counterfeit cigarettes present a serious public health risk. The recent increases in state cigarette excise taxes in the north-eastern states have created a situation where Virginia has become a primary source of cigarettes for traffickers in the United States. Virginia currently has the second lowest state tax rates on cigarettes in the country, after Missouri. Meanwhile, New York, Rhode Island, and New Jersey have some of the highest cigarette tax rates in the country. In the past two years, a number of studies, some academically published in peer-reviewed journals, have determined that Virginia is currently the largest single source of out-of-state, black market cigarettes in New York City. By some estimates, up to 30% of all cigarettes purchased in New York City are black market; of those, over half may be trafficked from Virginia. The profits that can be generated by exploiting the differences in tax rates between Virginia and the states north of the Commonwealth are staggering. The state excise tax rate for a carton of cigarettes (10 packs) is $3.00 in Virginia; in New Jersey, it is $27.00; in Rhode Island, it is $34.60; and in New York, it is $43.50, while in New York City, it is $58.50. Traffickers can therefore realize a profit of around $100,000 for a smuggling run from Virginia to New York City, transporting in a car or van just 1,500 cartons of cigarettes. In turn, a tractor-trailer filled with cartons of cigarettes represents a potential profit of a few million dollars. These large amounts of money have proven irresistible to organized crime. Law enforcement intelligence reports have indicated that gangs and other organized crime rings have increasingly begun to focus their efforts on cigarette trafficking as a source of revenue. The profit margins on black market cigarettes are now greater than for cocaine, heroin, or illegal firearms. If organized crime continues to view Virginia as an ideal location to obtain cigarettes, their habitual presence may lead, in turn, to increases in attendant crimes—robberies, burglaries, credit card fraud, and money laundering. The tax stamp that Virginia currently uses on cigarette packs has a number of security features, which can assist law enforcement in determining if a particular stamp is genuine or counterfeit. Tax stamps with higher security features, and with digital encoding capabilities, exist. However, there are associated costs with the use of high-tech tax stamps, and most of the information which a digital stamp could provide can currently be obtained with Virginia’s existing stamps, albeit with more effort, such as tracing the serial number on a stamp back to the wholesaler. As almost all data and law enforcement intelligence indicates that Virginia is a source state for trafficked cigarettes, and not a destination state, switching to a digital tax stamp would probably not have a significant impact on Virginia’s tax revenues. However, technology could be used to assist manufacturers, wholesalers, and the Virginia Department of Taxation in expediting the filing of mandatory reports, and in facilitating the payments made by wholesalers for the tax stamps which they affix to packs of cigarettes. Currently, the mandatory reports made by manufacturers and wholesalers to the Virginia Department of Taxation and the Office of the Attorney General of Virginia are generated in paper format, and sent by mail. In a similar manner, the payments made for tax stamps by wholesalers could be submitted to the Virginia Department of Taxation electronically. Details: Richmond: Virginia State Crime Commission, 2013. 32p. Source: Internet Resource: Senate Document No. 5: Accessed April 17, 2013 at: http://leg2.state.va.us/dls/h&sdocs.nsf/fc86c2b17a1cf388852570f9006f1299/dba061dea0fa878b852579c8006e00a4/$FILE/SD5.pdf Year: 2013 Country: United States URL: http://leg2.state.va.us/dls/h&sdocs.nsf/fc86c2b17a1cf388852570f9006f1299/dba061dea0fa878b852579c8006e00a4/$FILE/SD5.pdf Shelf Number: 128402 Keywords: Cigarette Smuggling (Virginia)Cigarette TraffickingCounterfeit CigarettesOrganized CrimeTax Evasion |
Author: Schneider, Friedrich Title: The Shadow Economy Summary: Summary: • Measurement of the shadow economy is notoriously difficult as it requires estimation of economic activity that is deliberately hidden from official transactions. Surveys typically understate the size of the shadow economy but econometric techniques can now be used to obtain a much better understanding of its size. • The shadow economy constitutes approximately 10 per cent of GDP in the UK; about 14 per cent in Nordic countries and about 20–30 per cent in many southern European countries. • The main drivers of the shadow economy are (in order): tax and social security burdens, tax morale, the quality of state institutions and labour market regulation. A reduction in the tax burden is therefore likely to lead to a reduction in the size of the shadow economy. Indeed, a virtuous circle can be created of lower tax rates, less shadow work, higher tax morale, a higher tax take and the opportunity for lower rates. Of course, a vicious circle in the other direction can also be created. • Given this relationship, the high level of non-wage costs (averaging 39 per cent of total labour costs) and the penalty on individuals who move from earning one third to two thirds of the median wage (averaging 58 per cent of the increase in earnings for a one-earner couple) in the European Union should be a matter of real concern. The latter figure is 79 per cent in the UK and thus low-paid UK workers have a huge incentive to supplement their incomes in the shadow economy. • The number of participants in the shadow economy is very large. Although up-to-date figures are not available, at the end of the twentieth century up to 30 million people performed shadow work in the EU and up to 48 million in the OECD. Reliable detailed studies are not available for many countries. In Denmark, however, the latest studies suggest that about half the population purchases shadow work. In some sectors – such as construction – about half the workforce is working in the shadow economy, often in addition to formal employment. Only a very small proportion of shadow economy workers can be accounted for by illegal immigrants in most countries. • In western Europe, shadow work is relatively prevalent among the unemployed and the formally employed. Other non-employed (for example, the retired, homemakers and students) do relatively less shadow work. This has implications for policy in terms of the importance of social security systems that reduce the opportunities for shadow work among the unemployed and the importance of tax systems that do not discourage the declaring of extra income. • Policies focused on deterrence are not likely to be especially successful when tackling the shadow economy. The shadow economy is pervasive and made up of a huge number of small and highly dispersed transactions. We should also be wary about trying to stamp out the shadow economy as we may stamp out the entrepreneurship and business formation that goes with it. • There are, however, huge potential benefits from allowing the self-employed and small businesses to formalise their arrangements. Businesses cannot flourish if they remain in the shadow economy. They might be reluctant to formalise, however, if it involves admitting to past indiscretions. Worthwhile policies include: reducing business compliance regulation; amnesties; providing limited tax shelters for small-scale informal activity such as the provision of interest-bearing loans to relatives and friends; and allowing businesses to formalise using simple ‘off the shelf’ models. Such policies have been successful in other countries – and to a limited extent in the UK – with high benefit-to-cost ratios. • Given that the shadow economy constitutes a high proportion of national income, and varies between less than 8 per cent of national income and over 30 per cent of national income in OECD countries, official national income statistics can often be misleading. Comparisons are made even more difficult because some countries adjust figures for the shadow economy (for example, Italy) and others do not. • In less developed countries, the informal sector constitutes typically between 25 and 40 per cent of national income and represents up to 70 per cent of non-agricultural employment. In such countries, informal activity often arises because of the inadequacies of legal systems when it comes to formalising business registration. Details: London: Institute of Economic Affairs, 2013. 184p. Source: Internet Resource: Accessed June 5, 2013 at: http://www.iea.org.uk/publications/research/the-shadow-economy Year: 2013 Country: United Kingdom URL: http://www.iea.org.uk/publications/research/the-shadow-economy Shelf Number: 128963 Keywords: Commercial CrimesEconomic CrimesFinancial CrimeShadow Economy (U.K.)Tax EvasionUnderground Economy |
Author: Snowdon, Christopher Title: Drinking in the Shadow Economy Summary: Executive summary: • One in ten bottles or cans of beer sold in the UK have not had duty paid on them and there are growing reports of counterfeit spirits being sold by licit and illicit retailers. HMRC seized almost ten million litres of non-duty paid alcohol in 2010/11, a rise of 30 per cent in two years. The UK loses more revenue from the cross-border movement of alcohol than any other EU state. The aim of this paper is to identify the factors that encourage the production, distribution and purchasing of alcohol in the shadow economy. • Unrecorded alcohol encompasses smuggled alcohol, commercially manufactured counterfeit alcohol, domestic brewing and distilling, surrogate alcohol, alcohol fraud and cross-border shopping. Failing to deal with alcohol’s shadow economy threatens not only the public finances, but also public health and public order. Counterfeit spirits and surrogate alcohol frequently contain dangerous levels of methanol, isopropanol and other chemicals which cause toxic hepatitis, blindness and death. Alcohol smuggling and counterfeiting is linked to other illegal activities, including drug smuggling, prostitution, violence, money-laundering and terrorism. • Factors which lead to shadow economic activity include high taxes and social security payments, low tax morale, complex tax systems, low Gross Domestic Product, weak institutions and corruption. Evidence shows that the illicit alcohol market is also closely associated with high taxes, corruption and poverty. The affordability of alcohol appears to be the key determinant behind the supply and demand for smuggled and counterfeit alcohol. Affordability is low in some countries due to low incomes (e.g. Eastern Europe) and in others because of high alcohol duty (e.g. Scandinavia). The price of alcohol in neighbouring markets also influences rates of unofficial consumption. • Demand for alcohol is relatively inelastic and drinkers have a series of options available to them when real prices increase. They can do as the government hopes and drink less, but they can also do any of the following: (1) make savings elsewhere in the household budget, (2) switch from the on-trade to the off-trade, (3) downshift to cheaper drinks, (4) shop abroad, (5) brew or distil their own alcohol, (6) buy counterfeit or smuggled alcohol, and finally (7) buy surrogate alcohol (e.g. methanol, antifreeze, aftershave). The extent to which consumption patterns change depends on personal income and the affordability of alcohol. • Our analysis indicates that the affordability of alcohol does not have a strong effect on how much alcohol is consumed. Once unrecorded alcohol is included in the estimates, it can be seen that countries with the least affordable alcohol have the same per capita alcohol consumption rates as those with the most affordable alcohol. • Alcohol duty provides significant income to European governments, but maximising these revenues carries significant risks in terms of health, crime and secondary poverty. Lessons can be learnt from countries which have low rates of unrecorded alcohol. We conclude that economic prosperity, moderate taxation and minimal corruption are essential for a country to minimise the size the alcohol black market. Without these preconditions, efforts to tackle the illicit alcohol supply through education, deterrence and enforcement are unlikely to succeed. Details: London: Institute of Economic Affairs, 2012. 27p. Source: Internet Resource: IEA Discussion paper no. 43: Accessed June 5, 2013 at: http://www.iea.org.uk/publications/research/drinking-in-the-shadow-economy Year: 2012 Country: United Kingdom URL: http://www.iea.org.uk/publications/research/drinking-in-the-shadow-economy Shelf Number: 128964 Keywords: Alcohol IndustryBusiness CrimesCommercial CrimesFraudIllegal Alcohol SalesShadow EconomyTax Evasion |
Author: National Audit Office (U.K.) Title: Progress in Tackling Tobacco Smuggling Summary: HMRC’s renewed strategy for tackling tobacco smuggling is logical and includes a wide range of complementary measures, but the Department does not yet have an integrated approach to deterring and disrupting the distribution of illicit tobacco within the UK, according to the National Audit Office. Today’s report identifies some good progress in building intelligence overseas, with the expansion of HMRC’s network of intelligence officers. HMRC estimates that these officers helped overseas authorities seize goods equivalent to a prevented revenue loss of £658 million between 2011-12 and 2012-13. However, HMRC has limited powers to carry out an independent verification of the volume of seizures, which is reported by foreign customs authorities. HMRC met all but one of its key operational targets for tobacco in 2011-12 but failed to meet any of its targets in 2012-13. HMRC is unlikely to achieve its plan to prevent £1.4 billion in revenue being lost to tobacco smuggling from investment in new tobacco initiatives over the spending review period. Key initiatives funded as part of its spending review settlement have been delayed or cancelled, including one designed to tackle the over-supply of genuine tobacco overseas, as the proposed approach was abandoned because of legal concerns. HMRC achieved £328 million by the end of 2012-13 from these new initiatives, less than two-thirds of the benefit expected so far (£527 million). HMRC recognizes the need for better intelligence on distribution networks, if it is to target its domestic enforcement activities efficiently. It also lacks a good understanding of the volume of prosecutions and other sanctions needed to deter effectively the trade in illicit tobacco. HMRC is concerned that supplies of certain brands to specific countries are higher than legitimate local demand. Supply chain legislation was introduced in 2006 but HMRC analysis shows a continuing problem of over-supply of genuine tobacco products. Tobacco manufacturers have a legal obligation not to facilitate smuggling so far as is reasonably practical, and HMRC has worked with them to review supply chain policies. However, so far it has issued only one warning letter and no penalties. Details: London: NAO, 2013. 48p. Source: Internet Resource: Accessed June 6, 2013 at: http://www.nao.org.uk/wp-content/uploads/2013/06/10120-001-Tobacco-smuggling-Full-report.pdf Year: 2013 Country: United Kingdom URL: http://www.nao.org.uk/wp-content/uploads/2013/06/10120-001-Tobacco-smuggling-Full-report.pdf Shelf Number: 128979 Keywords: Tax EvasionTobacco Smuggling (U.K.) |
Author: Baker, Raymond Title: Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011 Summary: Illicit flows of capital through developing countries due to trade misinvoicing is one of the most pressing challenges facing policymakers in these countries. The global figure for illicit financial outflows from developing countries is approximately $542 billion per year on average (over a 10-year time series), and trade misinvoicing makes up close to 80 percent of this or $424 billion. Capital flight, facilitated by a global network of secrecy jurisdictions and complex, opaque corporate and account structures, robs governments and societies of needed revenue for domestic investment in the private sector, infrastructure development, and the provision of vital social services. This translates into lost opportunities, lost jobs, and lost potential. This study explores the economic and the policy side of the issue of trade misinvoicing using case studies of Ghana, Kenya, Mozambique, Tanzania, and Uganda. Data on illicit flows for these five countries demonstrate the varying magnitudes, sources, and consequences of trade misinvoicing at the country level and provide hope and warning to other developing countries. We find that trade misinvoicing is a significant source of illicit outflows and inflows of capital in each country, resulting in billions of dollars of lost investment and hundreds of millions of dollars in unrealized domestic resource mobilization. The sources of trade misinvoicing varied across the cases, as did the policy environment in which this misinvoicing occurs. However, we also find significant facets of this issue that apply to all the countries, particularly with regards to customs invoice review procedures and access to on-the-spot information. These challenges represent opportunities for the five countries to improve their economic systems and accountability mechanisms through greater transparency. Details: Washington, DC: Global Financial Integrity, 2014. 72p. Source: Internet Resource: Accessed June 26, 2014 at: http://www.gfintegrity.org/wp-content/uploads/2014/05/Hiding_In_Plain_Sight_Report-Final.pdf Year: 2014 Country: Africa URL: http://www.gfintegrity.org/wp-content/uploads/2014/05/Hiding_In_Plain_Sight_Report-Final.pdf Shelf Number: 132540 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: KPMG Title: Illicit Tobacco in Australia Summary: For the first time since the implementation of Australia's plain packaging experiment we now have hard data to replace the anecdotes and predictions about its true impact, and the data show that since the introduction of this policy the black market has grown while consumption of tobacco overall has not declined. This report shows that smugglers and counterfeiters have been the big winners in Australia since the implementation of plain packaging at a great loss to the treasury. In less than a year, consumption of illegal, branded cigarettes, some of which now enjoy higher market share than legal brands in Australia, has increased by 154 percent. As a result, the government has lost up to AUD1.0 billion in tax revenue, while the criminal gangs behind this activity have lined their pockets. PMI supports reasonable regulation, but we believe governments have a responsibility to ensure the laws they pass meet their stated goals, uphold the rule of law, are evaluated based on objective standards and do not lead to negative consequences, such as boosting the illegal market at the expense of legitimate manufacturers and retailers. As studies quantifying actual changes in behavior and the marketplace since the introduction of plain packaging continue to come out of Australia, it is our hope that this evidence will not be ignored. Details: London: KPMG, 2014. 74p. Source: Internet Resource: Accessed August 4, 2014 at: https://www.imperial-tobacco.com/assets/files/cms/KPMG_FY2013_Illicit_Trade_Report___FINAL___11_April_2014.pdf Year: 2014 Country: Australia URL: https://www.imperial-tobacco.com/assets/files/cms/KPMG_FY2013_Illicit_Trade_Report___FINAL___11_April_2014.pdf Shelf Number: 132880 Keywords: CounterfeitingIllegal MarketsIllegal Tobacco (Australia)Illicit TobaccoSmugglingTax Evasion |
Author: Hawken, Angela Title: Unintended Consequences of Cigarette Taxation and Regulation Summary: Tobacco smoking harms health. Taxes and regulations can reduce that harm. But evasion reduces the efficacy of taxes and regulations and creates harms of its own in the form of illicit markets. Enforcement can reduce evasion but creates additional harms, including incarceration and violence. Peter Reuter has pointed out that a flat ban on cigarettes would be likely to generate illicit-market harms similar to the harms of existing illicit drug markets. Taxes and regulations can be thought of as "lesser prohibitions," subject to the same sorts of risks. Minimizing total harm means minimizing the sum of abuse harms and control harms. Tighter regulations and higher taxes on cigarettes risk increasing the size of the existing illicit tobacco markets, which are already substantial. That risk can be somewhat blunted by increasing enforcement effort, but doing so can be costly on several dimensions and might, under plausible assumptions, lead to an increase in violence. Tobacco policymaking should therefore consider illicit markets and the need for enforcement; some of the health benefits of regulation and taxation may be offset by increased illicit-market side effects and enforcement costs. The presence of licit substitutes, such as e-cigarettes, can greatly reduce the size of the problem; the regulation of e-cigarettes should take this effect into account. If enforcement is to be increased to counterbalance tightened controls, positive-feedback dynamics suggest that the enforcement increase should precede, rather than follow, the tightening. Details: Malibu, CA: Pepperdine University - School of Public Policy, 2013. 50p. Source: Internet Resource: School of Public Policy Working Papers, Paper 47: Accessed August 11, 2014 at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2354772 Year: 2013 Country: United States URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2354772 Shelf Number: 132993 Keywords: Cigarette SmugglingCigarettesIllegal Tobacco (U.S.)Illicit MarketsTax Evasion |
Author: Kar, Dev Title: Brazil: Capital Flight, Illicit Flows, and Macroeconomic Crises, 1960-2012 Summary: This September 2014 study from Global Financial Integrity found that more than US$400 billion flowed illegally out of Brazil between 1960 and 2012-draining domestic resources, driving the underground economy, exacerbating inequality, and facilitating crime and corruption. The Brazilian economy lost at least US$401.6 billion in illicit financial outflows from 1960 to 2012. These outflows represent the proceeds of crime, corruption, and tax evasion, and have serious negative consequences for Brazil. Outflows were found to drain resources from the Brazilian economy, to drive the underground economy, and to exacerbate inequality. Furthermore, the report found that illicit outflows are growing. Annual average illicit outflows increased from US$310 million in the 1960s to US$14.7 billion in the first decade of the twenty first century before jumping to US$33.7 billion over the last three years of the study, 2010-2012. On average, Brazil's illicit outflows are equivalent to 1.5% of the country's official GDP. Details: Washington, DC: Global Financial Integrity, 2014. 44p. Source: Internet Resource: Accessed September 9, 2014 at: http://www.gfintegrity.org/report/country-case-study-brazil/ Year: 2014 Country: Brazil URL: http://www.gfintegrity.org/report/country-case-study-brazil/ Shelf Number: 133183 Keywords: CorruptionFinancial Crimes (Brazil)Socioeconomic Conditions and CrimeTax EvasionUnderground Economy |
Author: Deloitte MCS Ltd. Title: Illicit Trade of Tobacco in Australia: Update for 2012 Summary: In May 2012, Deloitte issued a report titled Illicit Trade of Tobacco in Australia: Report for 2011. That report, which was also commissioned by British American Tobacco Australia Limited (BATA), Philip Morris Limited (PML) and Imperial Tobacco Australia Limited (ITA), provided an estimate of the size of the illicit tobacco market for the 2011 calendar year. The purpose of this report is to provide an updated estimate of the illicit tobacco market compared to that reported for the 2011 calendar year. Details: Melbourne: Deloitte, 2012. 24p. Source: Internet Resource: Accessed September 17, 2014 at: http://www.bata.com.au/group/sites/bat_7wykg8.nsf/vwPagesWebLive/DO9879X3/$FILE/medMD99T566.pdf?openelement Year: 2012 Country: Australia URL: http://www.bata.com.au/group/sites/bat_7wykg8.nsf/vwPagesWebLive/DO9879X3/$FILE/medMD99T566.pdf?openelement Shelf Number: 133371 Keywords: Counterfeiting Illegal Markets Illegal Tobacco (Australia) Illicit Tobacco Smuggling Tax Evasion |
Author: International Tax and Investment Center Title: Asia-14: Illicit Tobacco Indicator 2013 Summary: This study is an update and expansion of our previous research, 'Asia-11 Illicit Tobacco Indicator 2012'. In light of newly available data sources, it has been possible to extend the coverage to include Cambodia, Laos, and Myanmar, resulting in full coverage of the 10 ASEAN member countries plus Australia, Hong Kong, Pakistan, and Taiwan. In 2013, 10.9% of cigarettes consumed in Asia-141 were illicit Total Consumption (legal and illicit) across the Asia-14 was an estimated 760.1 billion cigarettes in 2013. Of this, 10.9% or 82.8 billion cigarettes in Asia-14 were estimated to have been illicit. In ASEAN, Total Consumption was an estimated 608.2 billion cigarettes in 2013. Of this, 9.1% or 55.6 billion cigarettes were estimated to have been illicit. In 2013, the share of Illicit Consumption increased in 7 of the 11 markets that were part of the 'Asia-11 Illicit Tobacco Indicator 2012' report Nearly three quarters of Illicit Consumption occurred in just three markets: Pakistan (22.8% Illicit), the Philippines (18.1%), and Vietnam (20.7%). In the 11 markets for which estimates are available for both 2012 and 2013 (i.e., the 'Asia-11'), Illicit Consumption is estimated to have increased by 20.1%, from 66.5 billion cigarettes to 79.9 billion cigarettes (an increase of 13.4 billion cigarettes). This was driven primarily by the rise in Illicit Consumption in the Philippines (by 12.7 billion cigarettes, an increase of 198%), underpinned by significant growth in Domestic Illicit Consumption. 7 markets (Australia, Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam) saw an increase in the share of Illicit Consumption in Total Consumption of cigarettes between 2012 and 2013. The steepest rise was again in the Philippines. However, Pakistan, and Singapore saw noticeable declines in the share of Illicit Consumption in 2013, the former a result of declining Domestic Illicit volumes, and the latter a consequence of a decline in Contraband. In both cases, however, the share of Illicit Consumption in Total Consumption remained much higher than the Asia-14 average. Domestic and Non Domestic Illicit both contributed to the rise in Illicit Consumption in Asia There was a 181.2% rise in Domestic Illicit Consumption in the Philippines (equal to 11.0 billion cigarettes). A small amount of Domestic Illicit was also identified in Indonesia in 2013. A number of markets saw a rise in Non-Domestic Illicit cigarettes in 2013. Consumption of Contraband cigarettes increased in Indonesia and Taiwan, while consumption of Counterfeit cigarettes rose sharply in the Philippines. There were increases in Non-Domestic Illicit of Unspecified Market Variant in Australia and Vietnam. Asia-14 government tax revenue losses from Illicit Consumption totalled US$ 3.9 billion in 2013 The tax loss associated with Illicit Consumption of cigarettes increased in 6 markets compared with 2012. In the 11 markets for which estimates are available for both 2012 and 2013, the estimated tax loss from Illicit Consumption increased from US$ 3.4 billion in 2012 to US$ 3.9 billion, an increase of 13.8%. The largest rise in tax loss in absolute terms was in the Philippines (497%). Australia and Indonesia also experienced a significant rise in estimated tax losses from Illicit Consumption. The government tax revenue losses from Illicit Consumption in the ASEAN region totalled US$ 2.1 billion in 2013. Details: Oxford, UK: Oxford Economics, 2014. 220p. Source: Internet Resource: Accessed October 8, 2014 at: http://www.pmi.com/eng/tobacco_regulation/illicit_trade/Documents/Asia-14%20Illicit%20Tobacco%20Indicator%202013.pdf Year: 2014 Country: Asia URL: http://www.pmi.com/eng/tobacco_regulation/illicit_trade/Documents/Asia-14%20Illicit%20Tobacco%20Indicator%202013.pdf Shelf Number: 134222 Keywords: CigarettesContrabandEconomic CrimesFinancial CrimesIllegal MarketsIllegal TobaccoIllicit Products (Asia)Illicit TobaccoTax Evasion |
Author: International Tax and Investment Center Title: Asia-11: Illicit Tobacco Indicator 2012 Summary: In 2012, 9% of cigarettes consumed in Asia-11 were illicit Total Consumption (legal and illicit) across the Asia-111 markets covered in this report totalled an estimated 736.4 billion cigarettes in 2012, of which 9.0% or 66.5 billion cigarettes are estimated to have been illicit. This includes consumption of illicit imports and illicit products locally manufactured, such as under/non-declared products from local manufacturers. Illicit share was over 25% in five markets Brunei, Hong Kong, Malaysia, Singapore, and Pakistan all had estimated shares of illicit cigarettes in Total Consumption of over 25% in 2012. Illicit volumes were highest in Pakistan, Vietnam, and Malaysia In 2012, in both Vietnam and Pakistan, Illicit Consumption was over 20 billion cigarettes. In Malaysia the volume of illicit cigarettes was estimated at almost 8 billion. Domestic illicit cigarette volumes were highest in Pakistan and the Philippines In Pakistan and the Philippines, illicit cigarettes produced by local manufacturers and sold in the market without payment of taxes totalled an estimated 25 billion cigarettes in 2012. Asia-11 government tax revenue losses from Illicit Consumption totaled US$ 3.4 billion in 2012 The biggest tax losses in absolute terms occurred in Australia, Malaysia, Hong Kong, and Vietnam. Details: Oxford, UK: Oxford Economics, 2013. 132p. Source: Internet Resource: Accessed October 8, 2014 at: http://www.pmi.com/eng/tobacco_regulation/illicit_trade/Documents/Asia_11_Illicit_Tobacco_Indicator_2012.pdf Year: 2013 Country: Asia URL: http://www.pmi.com/eng/tobacco_regulation/illicit_trade/Documents/Asia_11_Illicit_Tobacco_Indicator_2012.pdf Shelf Number: 133908 Keywords: Cigarettes ContrabandEconomic Crimes Financial Crimes Illegal Markets Illegal Tobacco Illicit Products (Asia) Illicit Tobacco Tax Evasion |
Author: International Tax and Investment Center Title: Asia-11: Illicit Tobacco Indicator: 2013 Update for the Philippines Summary: Excise rates on the majority of cigarettes in the Philippines (Low-tax tier) rose by 341% on 1st January 2013. Excise rates on brands in the Mid-tax tier increased by 231%, while "premium-price" brands (High-tax tier) saw an increase of 108% in excise rates. This tax increase has contributed to a 59% rise in the pack price of the most sold brands in both the "low-price" and "premium-price" segments. The price increase on the most sold brand in the "super-low price" segment was highest at 175%. Legal Domestic Sales dropped almost 16% in 2013 from a year earlier. However, this decline was almost fully offset by an increased level of Illicit Consumption. As a result, Total Consumption (legal and illicit) was only down 3% in 2013. There has been a sharp rise in Illicit Consumption from 5.9% in 2012 to an estimated 18.1% of Total Consumption or 19.1 billion cigarettes in 2013. This rise primarily relates to increased consumption of Domestic Illicit cigarettes, which has risen sharply from 5.6% of Total Consumption in 2012 to an estimated 16.3% of Total Consumption or 17.1 billion cigarettes in 2013. There has also been an 800% increase in the consumption of Counterfeit cigarettes, which accounted for 1.8% of Total Consumption or 1.8 billion cigarettes in 2013, compared to 0.2% of Total Consumption in 2012. The cigarette tax revenue loss (excise and VAT) has risen to PHP 15.6 billion in 2013, representing an increase of 497% compared to 2012. Details: Oxford, UK: Oxford Economics, 2014. 32p. Source: Internet Resource: Accessed October 9, 2014 at: http://www.oxfordeconomics.com/Media/Default/landing-pages/asia11/report-asia11-2014.pdf Year: 2014 Country: Philippines URL: http://www.oxfordeconomics.com/Media/Default/landing-pages/asia11/report-asia11-2014.pdf Shelf Number: 134220 Keywords: Cigarettes (Philippines)ContrabandEconomic Crimes Financial Crimes Illegal Markets Illegal Tobacco Illicit Products Illicit Tobacco Tax Evasion |
Author: Ardizzi, Guerino Title: Measuring the underground economy with the currency demand approach: a reinterpretation of the methodology, with an application to Italy Summary: We contribute to the debate on how to assess the size of the underground or shadow economy with a reinterpretation of the traditional Currency Demand Approach (CDA) a la Tanzi. We introduce three main innovations. First, we take as dependent variable in the money demand equation a direct measure of the value of cash transactions: the flow of cash withdrawn from current accounts relative to total non-cash payments. This avoids use of the Fisher equation and so overcomes two severe criticisms of the traditional CDA. Second, instead of the tax burden, usually taken as the main motive for non-compliance, we include among the covariates two direct indicators of detected tax evasion. Finally, we also control for the role of illegal economic activity, such as drug dealing and prostitution, which - jointly with the shadow economy - contributes to the larger aggregate of the unobserved economy and represents a significant component of total cash payments. We then propose an application of this "modified CDA" to a panel of 91 Italian provinces for the years Details: Bank of Italy, 2012. 34p. Source: Internet Resource: Working Paper no. 864: Accessed October 13, 2014 at: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td12/td864_12/en_td864/en_tema_864.pdf Year: 2012 Country: Italy URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td12/td864_12/en_td864/en_tema_864.pdf Shelf Number: 133888 Keywords: Financial CrimesTax EvasionUnderground Economy (Italy) |
Author: de Lacy, Elen Title: Predictors of tobacco smuggling in the South Wales Valleys Summary: In the space of one week in November 2008, Welsh Trading Standards officers in twelve South East Wales authorities conducted authenticity checks on over 54,000 packs of cigarettes and hand rolling tobacco. As a result of this work, over 45,000 cigarettes and 144kg of hand rolling tobacco were seized. There are different types of illicit trade in tobacco products. These include large scale smuggling, bootlegging and counterfeit smuggling. Not all smuggling involves counterfeit products. Smuggled products may also be UK manufactured tobacco products that have been diverted to the black market. Definitions - Smuggling is the illegal transport and distribution of tobacco products, usually without payment of correct government taxes. Smuggling can be large scale or small bootlegging operations. - Counterfeiting is the illegal production of "fake" brand cigarettes without the consent of the brand owner. Cheap and illicit tobacco undermines price (tax) and other tobacco control measures such as age of sale regulations. The criminal activities of smuggling, and increasingly, counterfeiting, lead to the availability of tobacco at less than half the tax-paid price in many deprived areas. This maintains smokers in their addiction and encourages young people to start smoking. It is estimated that 11.6% of all internationally traded cigarettes are smuggled, equivalent to 657 billion cigarettes a year, causing losses to government revenue worldwide of US$40.5 billion. In the UK by the late 1990s, cigarette smuggling had reached epidemic proportions. The tobacco industry estimated that 25%-30% of the total market was made up of illegally imported cigarettes15 although Customs & Excise estimated the figure to be no more than 21%16. Tobacco smuggling was costing the Government more than L3 billion a year in lost revenue. Cutting tobacco tax cannot solve the problem of smuggling. Even if all countries levelled exactly the same level of taxes and had identical prices, smuggling would still continue at a large scale. The total illicit cigarette market in high income countries is 9.8% compared to 16.8% in low income countries. It has been estimated that if the global illicit trade were eliminated, governments would gain at least $31 billion, and from 2030 onwards would save over 160,000 lives a year. Details: Cardiff: ASH Wales, 2011. 17p. Source: Internet Resource: Accessed November 25, 2014 at: http://www.ashwales.org.uk/creo_files/upload/default/report_of_predictors_of_smuggling_in_the_south_wales_valleys.pdf Year: 2011 Country: United Kingdom URL: http://www.ashwales.org.uk/creo_files/upload/default/report_of_predictors_of_smuggling_in_the_south_wales_valleys.pdf Shelf Number: 134237 Keywords: Cigarette Smuggling (U.K.)Illicit CigarettesTax EvasionTobacco Smuggling |
Author: Enste, Dominik H. Title: The shadow economy in industrial countries: Reducing the size of the shadow economy requires reducing its attractiveness while improving official institutions Summary: The shadow (underground) economy plays a major role in many countries. People evade taxes and regulations by working in the shadow economy or by employing people illegally. On the one hand, this unregulated economic activity can result in reduced tax revenue and public goods and services, lower tax morale and less tax compliance, higher control costs, and lower economic growth rates. But on the other hand, the shadow economy can be a powerful force for advancing institutional change and can boost the overall production of goods and services in the economy. The shadow economy has implications that extend beyond the economy to the political order. The shadow economy should not be seen as solely an economic problem, to be resolved by attacking the symptoms through higher fines and tougher controls. A country-specific analysis of causes and consequences is necessary in order to develop policy measures appropriate to the country's level of development. Policymakers should view illicit work as a signal of the need to decrease the attractiveness of the shadow economy through better regulation, a fair and transparent tax system, and more efficient institutions (good governance). Organized crime and illegal employment should nevertheless be fought through stricter controls and enforcement. Details: Bonn: IZA World of Labor, 2015. 10p. Source: Internet Resource: Accessed April 24, 2015 at: http://wol.iza.org/articles/shadow-economy-in-industrial-countries-1.pdf Year: 2015 Country: International URL: http://wol.iza.org/articles/shadow-economy-in-industrial-countries-1.pdf Shelf Number: 135386 Keywords: Financial CrimeIllicit WorkOrganized CrimeShadow EconomyTax EvasionUnderground Economy |
Author: Fleenor, Patrick Title: California Schemin': Cigarette Tax Evasion and Crime in the Golden State Summary: Earlier this year federal agents closed down a ring that allegedly smuggled millions of packs of cigarettes from North Carolina to California, affixed counterfeit stamps to them, and sold them to the general public. This illicit enterprise reportedly cost the state government some $4.3 million in lost revenue. On the morning of December 15, 2002, a band of robbers burst into a Merced distribution center and rounded its employees up at gunpoint. After tying up the workers the thieves used forklifts to load pallets of cigarettes into a truck. The robbers then grabbed rolls of California cigarette tax stamps and fled. Police estimated that the group made off with more than $1 million in loot. The 2002 heist was not the first time that the distribution center or its employees has been victimized. Two years earlier one of its trucks was hijacked by two men. Its driver was forced into a nearby orchard where he was bound and gagged. The bandits then made off with $40,000 worth of cigarettes. The thieves were later apprehended by police. These are just a few examples from the wave of tobacco-related crime that has swept California during the last eight or so years. At first glance these crimes appear bizarre. After all, each describes serious criminal activity involving a product not much different from the others that fill the shelves of convenience stores and gas stations. There is one major difference, however, and that is taxes. Since 1998 tax hikes have helped raise the price of cigarettes in California to approximately $4.00 per pack, well above the price in other states or elsewhere in the world. The first two tax hikes occurred in November of 1998 when voters narrowly approved Proposition 10 and California joined 45 other states in the Master Settlement Agreement (MSA) with the four largest tobacco manufacturers. Proposition 10 raised the state's cigarette tax from 37 to 87 cents per pack,4 and the MSA raised nationwide taxes on cigarettes by nearly $250 billion over the next 25 years.5 Two smaller tax hikes soon arrived from Washington, as the federal government raised its tax from 24 to 34 cents per pack in January 2000 and then to 39 cents at the beginning of 2003. On November 7 voters in California will decide whether to raise the state tax on cigarettes even higher, by an amount much larger than any state has ever considered. Proposition 86 would increase the state cigarette excise by $2.60, from its current rate of 87 cents to $3.47 per pack. Approval would give California the highest cigarette tax in the nation and push the price of a typical pack of cigarettes to around $6.50. Details: Washington, DC: Tax Foundation, 2015. 12p. Source: Internet Resource: Special Report No. 145: Accessed June 4, 2015 at: http://taxfoundation.org/sites/taxfoundation.org/files/docs/sr145.pdf Year: 2006 Country: United States URL: http://taxfoundation.org/sites/taxfoundation.org/files/docs/sr145.pdf Shelf Number: 135888 Keywords: Black MarketsContraband CigarettesContraband TobaccoIllegal TobaccoRobberyTax Evasion |
Author: Fleenor, Patrick Title: Cigarette Taxes, Black Markets, and Crime: Lessons from New York's 50-Year Losing Battle Summary: As large state government budget gaps have opened in the past year, lawmakers across the country are turning to cigarette taxes for added revenue. Twenty states raised cigarette tax rates in 2002, and more hikes may be on the agenda during state legislative sessions in 2003. Proponents of high cigarette taxes portray them as innocuous levies that improve public health. Yet those taxes have long been known to have a dark side. Since the first state cigarette taxes were imposed in the 1920s, black markets and related criminal activity have plagued high-tax jurisdictions. Such activity has proven to be resistant to law enforcement curtailment efforts. Thanks to recent city- and state-level tax hikes, New York City now has the highest cigarette taxes in the country-a combined state and local tax rate of $3.00 per pack. Consumers have responded by turning to the city's bustling black market and other low-tax sources of cigarettes. During the four months following the recent tax hikes, sales of taxed cigarettes in the city fell by more than 50 percent compared to the same period the prior year. New York has a long history of cigarette tax evasion. Former governor Malcolm Wilson dubbed the city the "promised land for cigarette bootleggers." Over the decades, a series of studies by federal, state, and city officials has found that high taxes have created a thriving illegal market for cigarettes in the city. That market has diverted billions of dollars from legitimate businesses and governments to criminals. Perhaps worse than the diversion of money has been the crime associated with the city's illegal cigarette market. Smalltime crooks and organized crime have engaged in murder, kidnapping, and armed robbery to earn and protect their illicit profits. Such crime has exposed average citizens, such as truck drivers and retail store clerks, to violence. The failure of New York policymakers to consider the broader effects of high cigarette taxes has been a mistake repeated across the country in the stampede to maximize tax revenue from this demonized product. Too often, policymakers do not consider these effects in the erroneous belief that people do not respond to government-created economic incentives. The negative effects of high cigarette taxes in New York provide a cautionary tale that excessive tax rates have serious consequences-even for such a politically unpopular product as cigarettes. Details: Washington, DC: Cato Institute, 2003. 20p. Source: Internet Resource: Policy Analysis no. 468: Accessed June 4, 2015 at: http://object.cato.org/sites/cato.org/files/pubs/pdf/pa468.pdf Year: 2003 Country: United States URL: http://object.cato.org/sites/cato.org/files/pubs/pdf/pa468.pdf Shelf Number: 108191 Keywords: Black MarketsCigarettesContraband TobaccoIllegal MarketsTax EvasionTobacco Control |
Author: Kar, Dev Title: Illicit Financial Flows to and from the Philippines: A Study in Dynamic Simulation, 1960-2011 Summary: This study presents a model of the drivers and dynamics of illicit financial flows to and from the Philippines over the period 1960-2011. Illicit flows through unrecorded balance of payments leakages and trade misinvoicing differ from broad capital flight which also includes flows of "normal" or legitimate capital. The larger implication is that models of capital flight that net out a mix of licit and illicit capital are fundamentally flawed. While legitimate capital flows that are recorded can be netted out, flows that are illicit in both directions cannot as the net result would be conceptually equivalent to net crime, an absurd concept. Hence, we argue that traditional models of capital flight understate the problem facing developing countries and they fail to acknowledge the adverse impact that flows in both directions have on them. In contrast, the narrower focus on illicit flows permits an analysis of inflows and outflows, which are treated as separate but interacting transactions that impact both the official and underground economies. Thereby the study affords a fuller understanding of how illicit flows impact a developing country. Starting with a structural equations model the estimation strategy culminates in a vector error correction procedure that yields four salient findings. First, there exists a clear link between illicit inflows and outflows with the latter possibly financing the former. Second, illicit financial inflows drive the underground economy and hamper tax collection. Third, illicit outflows of about US$4.5 billion per annum on average deplete the country's domestic savings, which could hamper sustainable economic growth in the long run. Finally, illicit flows have on average cost the government US$1.5 billion per year in lost tax revenues over the period of 2001-2011. The loss in revenues, representing about 37 percent of the social benefits budget of the consolidated state and local governments in 2011, is significant. Details: Washington, DC: Global Financial Integrity, 2014. 56p. Source: Internet Resource: Accessed June 5, 2015 at: http://www.gfintegrity.org/wp-content/uploads/2014/05/Illicit-Financial-Flows-to-and-from-the-Philippines-Final-Report.pdf Year: 2014 Country: Philippines URL: http://www.gfintegrity.org/wp-content/uploads/2014/05/Illicit-Financial-Flows-to-and-from-the-Philippines-Final-Report.pdf Shelf Number: 131843 Keywords: CorruptionFinancial CrimeMoney LaunderingTax EvasionWhite Collar Crime |
Author: Alderman, Jess Title: Strategies to Combat Illicit Tobacco Trade Summary: Illicit tobacco trade is a significant global problem. Experts estimate that more than 10 percent of cigarettes bought around the world are sold illegally, and in the United States alone smuggling costs about $5 billion per year in lost state tax revenues. The contraband tobacco trade is one of the most complex tobacco control issues because it is intertwined with so many other political, legal, and policy concerns. High tobacco taxes have a significant positive impact on public health and the evasion of tobacco taxes directly undermines the documented ability of these taxes to reduce smoking rates. Other, more indirect effects include shielding tobacco purchases from state requirements relating to customer age verification, licensing, advertising, manufacturing standards, and record keeping. This law synopsis focuses on illicit tobacco trade within and across the borders of the United States. It explains how illegal tobacco trade works and why it is appealing, its impact on state revenues, and the past complicity of the tobacco industry in illicit trade. It explores the complex role played by Native American lands, tribes, and businesses in tax-free sales and outlines various law enforcement approaches to combat smuggling. It also recognizes the growing connection between smuggling and national security issues and describes the federal agencies and laws that address it. Finally, this law synopsis suggests ways in which state and local governments as well as health advocacy organizations can contribute to the fight against illicit tobacco trade. Details: St. Paul, MN: Tobacco Control Legal Consortium, 2012. 20p. Source: Internet Resource: Accessed August 26, 2015 at: http://publichealthlawcenter.org/sites/default/files/resources/tclc-syn-smuggling-2012_0.pdf Year: 2012 Country: United States URL: http://publichealthlawcenter.org/sites/default/files/resources/tclc-syn-smuggling-2012_0.pdf Shelf Number: 136586 Keywords: Illegal Markets Illegal Trade Illicit Trade Tax EvasionTobacco Smuggling |
Author: Simpson, Dick Title: Chicago and Illinois, Leading the Pack in Corruption Summary: For a century and a half, public corruption has been a shameful aspect of both Illinois and Chicago politics. The Governor's mansion and Chicago City Council Chambers have long been the epicenters of public corruption. The extent and pervasiveness of bribery, fraud, stealing from the taxpayers, and illegal patronage have made the city and state national leaders of corruption. Our notorious reputations have provided fodder for scores of comedians and late night talk show hosts. But corruption is a serious problem that hurts all citizens who put their trust - and tax dollars - in the hands of politicians who abuse the power they are given. New public corruption conviction data from the U.S. Department of Justice shows the Chicago metropolitan region has been the most corrupt area in the country since 1976. In addition, the data reveal that Illinois is the third most corrupt state in the nation. The latest information, just released by the Justice Department, provides new evidence of the need for reforms to reduce rampant corruption in Chicago and Illinois. Since 1970, four Illinois governors have been convicted of corruption. Yet only seven men have held this office in this time, meaning more than half of the state's governors have been convicted in the past forty-two years. Otto Kerner, who served from 1961 until his resignation in 1968 to accept a federal judgeship, was convicted in 1973 of mail fraud, bribery, perjury, and income tax evasion while governor. Dan Walker, who served from 1973 - 1977, was convicted in 1987 of obtaining fraudulent loans for the business he operated after he left office. George Ryan, who served from 1999 - 2003, was found guilty in 2006 of racketeering, conspiracy and numerous other charges. Many of the charges were part of a huge scandal, later called "Licenses for Bribes," which resulted in the conviction of more than 40 state workers and private citizens. The scandal involved unqualified truck drivers receiving licenses in exchange for bribes that would ultimately end up in Ryan's campaign fund. The scandal came to light when a recipient of one of these licenses crashed in to a van and killed six children. But perhaps the most famous of all Illinois corrupt officials is Rod Blagojevich, who served from 2003 until his impeachment in 2009. Blagojevich was ultimately convicted in 2011 of trying to sell the U.S. Senate seat vacated by Barack Obama. Other charges included his attempting to shake down Children's Memorial Hospital for a campaign contribution in return for funding and his trying to extort a racetrack owner. Not to be outdone, the City of Chicago has seen its share of convicted officials. The first conviction of Chicago aldermen and Cook County Commissioners for accepting bribes to rig a crooked contract occurred in1869. Since 1973, 31 more aldermen have been convicted of corruption. Approximately 100 aldermen have served since then, which is a conviction rate of about one-third. In 1973 and 1974, four aldermen were convicted of bribery, income tax evasion and mail fraud in a scandal involving zoning changes. In the 1980s, three aldermen pleaded guilty or were found guilty in Operation Incubator, a major FBI investigation into Chicago corruption. The convictions included bribery, racketeering, extortion, mail fraud and tax evasion. Less than 10 years later, seven more aldermen were convicted as part of Operation Silver Shovel, another major FBI investigation into corruption in Chicago in the 1990s. Between 1996 and 1999 these seven were convicted of bribery, money laundering, fraud and tax evasion. Details: Chicago: University of Illinois at Chicago, Department of Political Science and the Illinois Integrity Initiative of the University of Illinois Institute for Government and Public Affairs, 2012. 17p. Source: Internet Resource: Anti-Corruption Report No. 5: Accessed August 27, 2015 at: http://pols.uic.edu/docs/default-source/chicago_politics/anti-corruption_reports/leadingthepack.pdf?sfvrsn=2 Year: 2012 Country: United States URL: http://pols.uic.edu/docs/default-source/chicago_politics/anti-corruption_reports/leadingthepack.pdf?sfvrsn=2 Shelf Number: 136601 Keywords: BribesCorruptionExtortionRacketeeringTax Evasion |
Author: Gradel, Thomas J. Title: The Depth of Corruption in Illinois: Anti-Corruption Report Number 2 Summary: Public corruption in Illinois has a long history dating from the first scandal involving Chicago aldermen and Cook County commissioners in the 1860s. At that time they participated in a crooked contract to paint city hall. Today, nearly a century and a half later, crooked contracts still cost the taxpayers millions of dollars a year and crooked politicians still go to jail. As we continue our study of public corruption, we have discovered that our original findings underestimated the level of corruption in recent years. We now know that more than 1500 individuals have been convicted of myriad forms of public corruption since 1970. Based upon the testimony before the Illinois Reform Commission and our own research, we now believe that the cost of corruption, or "corruption tax," for the Chicago and Illinois taxpayer is at least $500 million a year. This is based upon testimony before the commission that about 5% of state government contracts are given out to political cronies and campaign contributors and on our own tallies of the costs of the major scandals over the last four decades. In our last report we provided a detailed analysis of the 30 aldermen and former aldermen convicted of public corruption since 1970. In this report we describe some of the major scandals of the last four decades, a timeline of more than 375 convicted individuals at all levels of government, and a further analysis of some of the costs of corruption which have caused us to revise our estimate of the corruption tax. The details of these scandals and their costs are included in the appendices of this report. Our research on all aspects of corruption is continuing. But we provide this update to support the report of the Illinois Reform Commission and to contribute to the ongoing debate in the state legislature. Only comprehensive reforms can lessen the level of corruption in Chicago and Illinois, currently the capitals of corruption in the United States. Given the high cost of corruption, we cannot hope to adopt a prudent city, county, or state budget without reform. Otherwise we will continue to pay too much for government services; we will keep honest businesses from locating here; and we will slow economic recovery from the current recession. Citizens will continue to distrust government at all levels and consider tax increases unfair. Here are a few examples of some of the costs of corruption in a selection of major scandals. The costs of the Jon Burge police brutality scandal has already reached $33.2 million dollars and counting; the Governor Rod Blagojevich related scandals called "Board Games" have already cost taxpayers $22. million; the Governor George Ryan driver licenses scandals were $4.9 million; the ghost payroll scandals in "Haunted Hall" were $3 million; the "Incubator" bribery cases involving Chicago aldermen have cost more than $239,000; and bribery cases with building inspectors more than $23,000. These costs do not include tens of millions of dollars for investigating, prosecuting, and imprisoning these various public criminals. Since there have been 1500 convictions since 1970 for bribery, tax evasion, lying to the FBI, and obstructing justice, the costs of corruption have been enormous. Curbing public corruption is the first step in reestablishing trust and pride in our government. We support the reforms recommended by Governor Quinn's Illinois Reform Commission Proposals. Any hope of curing the "culture of corruption" or the "Chicago Way" which has prevailed since the 1860s requires a comprehensive program of mutually reinforcing reforms. These must include a mix of corruption prevention and enforcement measures along with public involvement and education. To pass these reforms and to implement them requires the development of a broad coalition of support. In this regard the recent Joyce Foundation public opinion poll shows more than 60% of Illinois residents name corruption as one of their top concerns (even more than the economy or jobs). And the survey reveals that more than 70% favor a number of specific reforms, such as limiting the campaign money that legislative leaders can contribute to other legislative candidates. These findings indicate that there is a greater possibility now - at this moment, as President Obama would say -- to build a broad coalition around a comprehensive reform program than ever before in the past half century. Efforts at reform should occur in all units of government and should move forward quickly while the level of public support, following the impeachment and removal of former Governor Rod Blagojevich, is at such a high level. Details: Chicago: University of Illinois at Chicago, Department of Political Science, 2009. 66p. Source: Internet Resource: Anti-Corruption Report No. 2: http://pols.uic.edu/docs/default-source/chicago_politics/anti-corruption_reports/anti-corruptionreportnumber2.pdf?sfvrsn=2 Year: 2009 Country: United States URL: http://pols.uic.edu/docs/default-source/chicago_politics/anti-corruption_reports/anti-corruptionreportnumber2.pdf?sfvrsn=2 Shelf Number: 136604 Keywords: BribesCorruptionPolitical CorruptionTax Evasion |
Author: Litina, Anastasia Title: Corruption and Tax Evasion: Reflections on Greek Tragedy Summary: We provide empirical support and a theoretical explanation for the vicious circle of political corruption and tax evasion in which countries often fall into. We address this issue in the context of a model with two distinct groups of agents: citizens and politicians. Citizens decide the fraction of their income for which they evade taxes. Politicians decide the fraction of the public budget that they peculate. We show that multiple self-fulfilling equilibria with different levels of corruption can emerge based on the existence of strategic complementarities, indicating that "corruption" may corrupt. Furthermore, we find that standard deterrence policies cannot eliminate the multiplicity of equilibria. Instead, policies that impose a strong moral cost on tax evaders and corrupt politicians can lead to a unique equilibrium. Details: Athens: Back of Greece, Economic Analysis and Research Department, 2015. 47p. Source: Internet Resource: Working Paper 193: Accessed August 28, 2015 at: http://www.bankofgreece.gr/BogEkdoseis/Paper2015193.pdf Year: 2015 Country: Greece URL: http://www.bankofgreece.gr/BogEkdoseis/Paper2015193.pdf Shelf Number: 136614 Keywords: CorruptionFinancial CrimesPolitical CorruptionTax Evasion |
Author: Artavanis, Nikolaos Title: Tax Evasion across Industries: Soft Credit Evidence from Greece Summary: We document that in semiformal economies, banks lend to tax-evading individuals based on the bank's assessment of the individual's true income. This observation leads to a novel approach to estimate tax evasion. We use microdata on household credit from a Greek bank, and replicate the bank underwriting model to infer the banks estimate of individuals' true income. We estimate that 43%-45% of self-employed income goes unreported and thus untaxed. For 2009, this implies 28.2 billion euros of unreported income, implying foregone tax revenues of over 11 billion euros or 30% of the deficit. Our method innovation allows for estimating the industry distribution of tax evasion in settings where uncovering the incidence of hidden cash transactions is difficult using other methods. Primary tax-evading industries are professional services - medicine, law, engineering, education, and media. We conclude with evidence that contemplates the importance of institutions, paper trail and political willpower for the persistence of tax evasion. Details: Cambridge, MA: National Bureau of Economic Research, 2015. 72p. Source: Internet Resource: NBER Working Paper No. 21552: Accessed September 16, 2015 at: http://www.nber.org/papers/w21552 Year: 2015 Country: Greece URL: http://www.nber.org/papers/w21552 Shelf Number: 136778 Keywords: Financial CrimesTax EvasionWhite-Collar Crime |
Author: Spanjers, Joseph Title: Illicit Financial flows and Development Indices: 2008-2012 Summary: This June 2015 report, the latest in a series by Global Financial Integrity (GFI), highlights the outsized impact that illicit financial flows have on the world's poorest economies. The study looks at illicit financial flows from some of the world's poorest nations and compares those values to some traditional indicators of development-including GDP, total trade, foreign direct investment, public expenditures on education and health services, and total tax revenue, among others-over the period 2008-2012. The report also produces several scatter plots in which illicit flows values for all developing and emerging market nations are compared to key trade indicators and various development indices, such as human development, inequality, and poverty, to determine if correlations exist between the two. By two different measures of poverty, the study reveals a positive correlation between higher levels of poverty and larger illicit outflows. That is, countries with higher levels of illicit financial flows (relative to GDP) tend to struggle with higher levels of poverty. Details: Washington, DC: Global Financial Integrity, 2015. 56p. Source: Internet Resource: Accessed September 16, 2015 at: http://www.gfintegrity.org/wp-content/uploads/2015/05/Illicit-Financial-Flows-and-Development-Indices-2008-2012.pdf Year: 2015 Country: International URL: http://www.gfintegrity.org/wp-content/uploads/2015/05/Illicit-Financial-Flows-and-Development-Indices-2008-2012.pdf Shelf Number: 136786 Keywords: Corruption Financial Crime Money LaunderingPovertyTax Evasion White Collar Crime |
Author: Global Financial Integrity Title: Illicit Financial Flows: The Most Damaging Economic Condition Facing the Developing World Summary: The book features five condensed and updated quantitative country studies on illicit financial flows (IFFs) from India, Mexico, Russia, the Philippines, and Brazil by GFI Chief Economist Dr. Dev Kar, as well as chapters written by GFI President Raymond Baker and Managing Director Tom Cardamone. Dr. Thomas Pogge, Leitner Professor of Philosophy and International Affairs at Yale University, writes on the human rights impact of illicit financial flows. The relationship between illicit flows and development is considered by Erik Solheim, the chair of the OECD's Development Assistance Committee. Details: Washington, DC: Global Financial Integrity, 2015. 192p. Source: Internet Resource: accessed October 28, 2015 at: http://www.gfintegrity.org/wp-content/uploads/2015/09/Ford-Book-Final.pdf Year: 2015 Country: International URL: http://www.gfintegrity.org/wp-content/uploads/2015/09/Ford-Book-Final.pdf Shelf Number: 137168 Keywords: BriberyDeveloping CountriesFinancial CrimesMoney LaunderingTax Evasion |
Author: Kar, Dev Title: Flight Capital and Illicit Financial Flows to and from Myanmar: 1960-2013 Summary: Myanmar is the most porous economy we have studied in depth. Long isolation, trade restrictions, and attempts to regulate currency exchange rates have combined to drive a substantial part of the economy underground. Totaling the flight capital numbers indicates that Myanmar has experienced largely unregulated financial movements of nearly US$120 billion over the period (a small portion of flight capital may be licit), while total illicit flows amounted to almost US$100 billion. In 2013 alone, unregulated financial inflows totaled some US$10 billion, over 20 percent of GDP. Purely illicit inflows were on a similar scale in that year, at 17 percent of GDP. And these numbers do not include the smuggling of drugs, timber, precious stones, and other goods, transported across various routes and mountain passes to and from India and China, as indicated by a brief selection of satellite images included in the pages following. Interestingly, the greater part of what we can analyze as illicit flows have been inward, in reaction to import controls and to escape import levies. Undervalued and smuggled imports have sustained the weakened economy through years of insularity, isolation, and instability. Tax collection to GDP at seven percent is one of the lowest in the world, undermining the ability of the state to provide adequate health and education services. Corruption, according to Transparency International's Perceptions Index, places Myanmar among the bottom 20 in the world. These are extremely serious challenges for a nation just beginning, haltingly, to emerge from its shadows. Within our focus on financial transparency concerns, we recommend that Myanmar 1) make concerted efforts to adopt and enforce Financial Action Task Force anti-money laundering and combatting terrorist financing regulations, 2) provide its Customs Department with real-time world market trade pricing data, 3) greatly improve its statistical capabilities, and 4) enhance border security and curtailment of smuggling. For this the nation will need sustained external financial and technical assistance for years to come. Details: Washington, DC: Global Financial Integrity, 2015. 64p. Source: Internet Resource: Accessed November 24, 2015 at: http://www.gfintegrity.org/wp-content/uploads/2015/09/Myanmar-Report-Final-1.pdf Year: 2015 Country: Burma URL: http://www.gfintegrity.org/wp-content/uploads/2015/09/Myanmar-Report-Final-1.pdf Shelf Number: 137330 Keywords: Border SecurityFinancial CrimesMoney LaunderingSmugglingTax EvasionTerrorist Financing |
Author: U.S. Government Accountability Office Title: IRS Whistleblower Program: Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers Summary: Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect almost $2 billion in additional revenue since 2011, when the first high-dollar claim was paid under the expanded program that pays qualifying whistleblowers a minimum of 15 percent of the collected proceeds. These revenues help reduce the estimated $450 billion tax gap - the difference between taxes owed and those paid on time. GAO was asked to review several aspects of the whistleblower program. Among other things, this report (1) assesses the WO claim review process, (2) assesses how the WO determines awards, (3) evaluates how the WO communicates with external stakeholders, and (4) evaluates IRS's policies and procedures for protecting whistleblowers. GAO reviewed the files of all 17 awards paid under 26 U.S.C. 7623(b) through June 30, 2015; reviewed IRS data; reviewed relevant laws and regulations, and the WO's policies, procedures and publications; and interviewed IRS officials, five whistleblowers that independently approached GAO, and nine whistleblower attorneys who were recommended by IRS or other attorneys. What GAO Recommends Congress should consider providing whistleblowers with legal protections against retaliation from employers. GAO makes ten recommendations to IRS including, tracking dates, strengthening and documenting procedures for award payments and whistleblower protections, and improving external communications. IRS agreed with our recommendations. Details: Washington, DC: GAO, 2015. 65p. Source: Internet Resource: GAO-16-20: Accessed February 9, 2016 at: http://www.gao.gov/assets/680/673440.pdf Year: 2015 Country: United States URL: http://www.gao.gov/assets/680/673440.pdf Shelf Number: 137817 Keywords: Financial CrimesTax EvasionWhistleblowersWhite Collar CrimeWhite Collar Offenses |
Author: Spence, Caroline Title: Smuggling in early Modern France Summary: This dissertation will examine the crime of smuggling in early modern France from circa 1500 to 1789. Smuggling was extremely common in early modern Europe, but in France it was particularly widespread and often violent. Goods of every kind were smuggled in and out of the country, and especially within the provinces of the kingdom. However, little has been written in English on smuggling in early modern France. As a result, a considerable amount of the secondary sources read are in French. These sources tend to focus on one commodity or one area, yet this dissertation is a much broader examination of the topic, encompassing the entire country and several different commodities. The dissertation also required a visit to the Musee National des Douanes in Bordeaux, which has an archive containing documents relating to the national customs administration. Many of these documents were essential for my topic and period of study and have been included here. The primary argument of this dissertation is that smuggling occurred as a result of the indirect taxes that the crown levied on different commodities. The administration of the indirect taxation will be examined in chapter one. The second, third, and fourth chapters will discuss the smuggling of salt, wine, and tobacco respectively. Each chapter will begin by discussing how the taxes on these commodities caused them to be smuggled. Subsequently, the nature and methods of smuggling these goods will be examined. Chapter five will investigate who the early modern French smuggler actually was. The treatment of the tax collectors will be discussed, as well as the question of the increasing professionalisation of smuggling. The involvement of ecclesiasts, soldiers, nobles, tax collectors, women and children will be discussed. The dissertation will conclude that the fundamental cause of smuggling was the harsh fiscal regime and especially the irregular way in which taxes were levied throughout the kingdom. Details: Coventry, UK: University of Warwick, 2010. 108p. Source: Internet Resource: Thesis: Accessed February 17, 2016 at: http://www2.warwick.ac.uk/fac/arts/emforum/projects/disstheses/dissertations/spence-caroline.pdf Year: 2010 Country: France URL: http://www2.warwick.ac.uk/fac/arts/emforum/projects/disstheses/dissertations/spence-caroline.pdf Shelf Number: 137857 Keywords: SmugglingStolen GoodsTax Evasion |
Author: Great Britain. National Audit Office Title: Tackling tax fraud: how HMRC responds to tax evasion, the hidden economy and criminal attacks Summary: According to a report by the National Audit Office published today, HMRC estimates that losses to tax fraud amount to $16 billion each year. This is nearly half of HMRC's estimate of the tax gap ($34 billion): the difference between the amount of tax HMRC should collect each year and the amount it actually collects. Today's report is the first in a series of reports which will evaluate how effectively HMRC tackles different aspects of tax fraud, a longstanding problem not only for HMRC but for tax administrations around the world. Reducing the amount of tax that is lost due to tax fraud is a high priority for HMRC. To do this it will need to make better use of its data and develop its analysis. In 2014/15 HMRC reported $26.6 billion[1] additional revenue from all its compliance work, including work to tackle tax fraud but also work to tackle other parts of the tax gap like error and tax avoidance. HMRC has only partial data on how much of the total yield is derived from its work to counter tax fraud. For example it has more complete information on its work to tackle organised crime than tax evasion. We estimate that between 30% and 40% of total compliance yield is generated by HMRC's activities to tackle tax fraud, but this is an estimate based on partial evidence. HMRC assesses that two groups, smaller businesses and criminals, are responsible for 17 of the 21 biggest tax fraud risks. Of these, 8 relate to organised crime and 9 involve medium-sized, small or micro-businesses. HMRC believes these businesses are responsible for tax losses of $17 billion, almost half of the total tax gap, but does not consider its internal estimate of how much of this is the result of tax fraud robust enough for publication. HMRC has assessed that using its powers to investigate by civil means is usually the best way to recover missing tax at the lowest cost. It pursues criminal prosecution for cases where it believes it needs to send a strong deterrent message or when, given the severity of the fraud, it considers prosecution the only appropriate action. HMRC met its target to increase prosecutions by 1,000 a year by 2014-15, but recognises that it needs to better prioritise the cases it selects for criminal investigation. Although HMRC cannot demonstrate that this was the right number, the target had the effect of prompting the department to change its processes and make its investigations more efficient. This led it to focus on less complex cases, in particular a large number of prosecutions for people who had evaded income tax, VAT and tobacco duty. HMRC has recognised that it needs to prosecute cases that more closely correspond with its analysis of tax fraud risks. HMRC has more to do to understand what benefits it has achieved by increasing the number of prosecutions. In 2014-15, HMRC claimed $295 million in yield from the deterrent effect of its additional 1,000 prosecutions. However, in 2015 HMRC evaluated the deterrent effect of these prosecutions and found that it could not verify their monetary value. HMRC research found increased awareness of prosecutions but could not find evidence they led to changes in behaviour or increases in tax revenues. HMRC is now taking a broader look at its strategy by, for example, starting to shift the balance of its work, placing more emphasis on measures to prevent losses rather than relying so much on investigating them afterwards. It has also improved its assessment of risk, including what risks might occur in the future. It is also working to improve the quality and amount of data it uses as part of an ambitious long-term strategy to transform its business. [1] A significant element of the yield calculation relies on estimates of current and future benefits and is not the amount of cash generated each year from HMRC's enforcement and compliance activities Details: London: NAO, 2016. 50p. Source: Internet Resource: HC 610, Session 2015-16: Accessed March 2, 2016 at: https://www.nao.org.uk/wp-content/uploads/2015/12/Tackling-tax-fraud-how-HMRC-responds-to-tax-evasion-the-hidden-economy-and-criminal-attacks.pdf Year: 2015 Country: United Kingdom URL: https://www.nao.org.uk/wp-content/uploads/2015/12/Tackling-tax-fraud-how-HMRC-responds-to-tax-evasion-the-hidden-economy-and-criminal-attacks.pdf Shelf Number: 138024 Keywords: Financial CrimesTax EvasionTax FraudWhite Collar Crime |
Author: Sharples, Natalie Title: Honest Accounts? The true story of Africa's billion dollar losses Summary: The Global South is being drained of resources by the rest of the world and it is losing far more each year than it gains. Africa alone loses $192 billion each year to the rest of the world. This is mainly in profits made by foreign companies, tax dodging and the costs of adapting to climate change. Whilst rich countries often talk about the aid their countries give to Africa, this is in fact less than $30 billion each year. Even when you add this to foreign investment, remittances and other resources that flow into the continent, Africa still suffers an overall loss of $58 billion every year. The idea that we are aiding Africa is flawed; it is Africa that is aiding the rest of the world. This money that Africa loses each year is over one and half times the amount of additional money needed to deliver affordable health care to everyone in the world. If the rest of the world continues to raid Africa at the same rate, over the next 10 years $580 billion will be lost by the African people. Many of Africa's loses directly benefit rich countries. They are a result of policies and practices that drain Africa and keep its people in poverty. These include tax dodging, unfair trade policies and the practices of multinational companies, and the brain drain of skilled workers. Details: London: Health Poverty Action, 2015. 40p. Source: Internet Resource: Accessed March 16, 2016 at: https://www.healthpovertyaction.org/wp-content/uploads/downloads/2014/08/Honest-Accounts-report-web-FINAL.pdf Year: 2015 Country: Africa URL: https://www.healthpovertyaction.org/wp-content/uploads/downloads/2014/08/Honest-Accounts-report-web-FINAL.pdf Shelf Number: 138264 Keywords: Economic CrimesPovertyTax Evasion |
Author: Heggstad, Kari Title: How Banks Assist Capital Flight from Africa: A Literature Review Summary: Systematic studies of the banking sector's involvement in facilitating capital flight from developing countries are limited. This paper was commissioned by Norad's Anti-Corruption Project (ANKOR) for the purpose of summarising key lessons from the existing literature and to identifying knowledge gaps. It focuses on capital flight from Africa and how much needed public finances are hidden abroad. The study is a desk study, based on a review of library and online literature databases and reports and documentation from national and international organisations. The material reviewed does not provide the information necessary to draw firm conclusions as to what constitutes "best practice" in providing donor support for better regulation of banks and financial institutions in Africa. The term "best practice" itself is unclear and depends much on the environment within which finance institutions work. The review shows that banks should not be disregarded as passive players when analysing capital flight. Banks play an active role in facilitating capital flight from Africa. However, to improve the regulation of the banking and finance sectors, there is a need for more detailed knowledge on how banks actually operate as facilitators and the mechanisms applied. Details: Bergen, Norway: Chr. Michelsen Institute, 2010. 33p. Source: Internet Resource: Accessed May 3, 2016 at: http://www.cmi.no/file/?972 Year: 2010 Country: Africa URL: http://www.cmi.no/file/?972 Shelf Number: 138905 Keywords: CorruptionFinancial CrimesMoney LaunderingTax Evasion |
Author: KPMG Title: Illicit Tobacco in Australia. 2015 Half Year Report Summary: This bi-annual report provides an overview of the nature and dynamics of the legal and illicit tobacco markets and an independent assessment of the size of the illicit tobacco market in Australia. It is commissioned jointly by British American Tobacco Australia, Imperial Tobacco Australia Limited and Philip Morris Limited. Key highlights: - Illicit tobacco consumption declined marginally to 14.3% of total consumption in the twelve months to June 2015. This was the first decline seen since 2012 - The overall decline was driven by a significant decrease in contraband consumption, such as manufactured cigarettes - The decline in illicit tobacco consumption was partially offset by a large rise in unbranded ("Chop Chop") tobacco. Details: London: KPMG, 2015. 83p. Source: Internet Resource: Accessed June 1, 2016 at: https://home.kpmg.com/uk/en/home/insights/2015/11/illicit-tobacco-in-australia.html Year: 2015 Country: Australia URL: https://home.kpmg.com/uk/en/home/insights/2015/11/illicit-tobacco-in-australia.html Shelf Number: 139255 Keywords: Counterfeiting Illegal Markets Illegal Tobacco (Australia) Illicit Tobacco Smuggling Tax Evasion |
Author: Australia. Auditor General Title: Strategies and Activities to Address the Cash and Hidden Economy Summary: In Australia, and similar countries internationally, the cash and hidden economy (cash economy) is a constant presence in the domestic economy. Sometimes also referred to as the shadow, non-observed or underground economy, the Australian Taxation Office (ATO) defines the cash economy as referring to businesses that deliberately hide income, from cash or electronic transactions, to avoid paying tax or superannuation obligations on the income they receive. The operation of the cash economy is a major, longstanding tax integrity risk for the ATO. Details: Sydney: Australian National Audit Office, 2016. 56p. Source: Internet Resource: ANAO Report No. 27 2015-16: https://www.anao.gov.au/sites/g/files/net1661/f/ANAO_Report_2015-2016_27.pdf Year: 2016 Country: Australia URL: https://www.anao.gov.au/sites/g/files/net1661/f/ANAO_Report_2015-2016_27.pdf Shelf Number: 140235 Keywords: Economic Crimes Financial Crime Tax EvasionUnderground Economy |
Author: Leuprecht, Christian Title: Smoking Gun: Strategic Containment of Contraband Tobacco and Cigarette Trafficking in Canada Summary: anadians think of contraband tobacco and cigarettes as a nuisance at best, or a tax-revenue problem at worst, not in terms of organized crime or terrorism. This authoritative study of the size, scope, and operations of contraband tobacco and cigarettes in Canada reveals this to be a false dichotomy. Canadian law enforcement seizures of contraband tobacco routinely include high-powered weapons, hard and designer drugs, stolen vehicles and other merchandise, and lots of cash. Indeed the week this report was released, police in Quebec carried out 70 raids and made 60 arrests against an international criminal network involved in drug and contraband tobacco trafficking, and money laundering, in the largest anti-contraband operation to date. Contraband tobacco is lucrative, it is produced and trafficked systematically alongside other illicit goods, and Canadian crime syndicates are heavily invested in its proceeds. Globally, money from contraband tobacco and cigarettes is a major source of revenue for the likes of ISIS, al-Qaeda, and Hezbollah, whose contraband fundraising activities in North America have been subject to indictments. Producers and traffickers of contraband prey on the most vulnerable population groups in Canadian society. They brazenly flaunt restrictions on procurement, manufacturing, packaging, promotion, and sale of tobacco and cigarettes. Their ranks count hardened Mafioso and notorious criminal bikers who exploit Native communities. Tobacco farmers divert crops to the illicit market; some cooperate to reap higher profits, some uncooperative ones are coerced or have their tobacco stolen. Compared to illicit drugs, materials and manufacture are readily accessible, and the market for contraband tobacco and cigarettes is huge, highly profitable and easy to reach. The loss factor is minimal because chances of detection are small, penalties lenient (if any are imposed at all), and social stigma less than for alternative illicit activities. Canada's contraband market in tobacco and cigarettes is estimated at more than $1.3 billion, which rivals the narcotics market. In Ontario alone, the illicit cigarette market is roughly $500 million annually and forgone tax revenue between $1.6 billion and $3 billion. Enforcement is hampered by entangled jurisdictional issues, collective action problems within and across jurisdictions, scarce enforcement resources, legislative gaps, and, it seems, lack of a comprehensive plan, let alone strategy. There has been some institutional learning, and worthwhile innovations at different jurisdictional levels - federal, provincial, and First Nations. This study explores and compares some of these innovations to forge a comprehensive approach to contraband tobacco and cigarettes. Although law enforcement has a role to play, like so much other criminal activity, we are clearly not going to arrest our way out of this problem. Ultimately, a comprehensive strategy needs to change the incentive structures in place on both the demand and supply sides, optimize legislative and regulatory frameworks, and improve inter-agency and inter-jurisdictional coordination. Key recommendations include: Revenue sharing with First Nations The collection and administration of an excise tax by First Nations governments promises a sustained stream of revenue for community development and infrastructure projects and a significant incentive to reduce tax evasion in cigarette sales to non-Natives. In return for greater fiscal autonomy, sales to ineligible customers would be curbed by reducing the quota allocation to First Nations. Halting diversion from legitimate growers in Ontario Ontario is the only Canadian jurisdiction where tobacco is grown. Although the transition from the Ontario Flue-Cured Tobacco Growers' Marketing Board to the Ontario Ministry of Finance has tightened monitoring and enforcement of raw leaf tobacco, three changes will hamper the ability to investigate and interrupt diversion of tobacco to illicit markets: once harvested, growers no longer need to identify the source and the final destination of raw leaf; labelling information that tracks baled raw leaf tobacco is no longer required; and reporting frequency has been loosened from weekly to quarterly. Criminalizing the unlicensed growth, sale, purchase, and/or transport of raw leaf would acknowledge the serious consequences of diverted raw leaf and empower police to reinforce the licensing regime. Federal coordination and a Tobacco Ombudsman C-10 opens the opportunity for the federal government to facilitate coordination of a unified taxation structure for tobacco and cigarettes for all Canadian peoples, across provinces and reserves. This authority could be administered and enforced by a Canadian Tobacco Ombudsman under the aegis of the Minister of Public Safety. An ombudsman could improve coordination and communication among law enforcement agencies and between law enforcement and other regulatory bodies. Enforcement: Lessons learned Ontario recently announced a Contraband Tobacco Enforcement Team that stands to draw lessons from Quebec, where Project ACCES has proven quite successful over more than a decade. Moreover, it and its outcomes come at no additional cost to government. In fact, it more than pays for itself: by reaping fines and seizures, and realizing a growing tax base due to deterring contraband without a change in smoking rates, the project has seen a return of as much as 16 times the investment. Public awareness Consumers of contraband tobacco are blissfully unaware of their habit's connection with organized crime; greater awareness might stem consumption, especially if on-reserve manufacturers associated with organized crime are clearly distinguished from those who are not. Contraband has a more pervasive impact on the public safety of Canada, Canadians, and Canadian interests than terrorism has ever had. If Canadians only knew, they would demand that government act accordingly. Now they do. It is time to act to ensure the benefits of taxation accrue to all citizens instead of organized criminals and terrorists. Details: Ottawa, ONT: Macdonald-Laurier Institute, 2016. 65p. Source: Internet Resource: Accessed September 21, 2016 at: http://www.macdonaldlaurier.ca/files/pdf/MLILeuprechtContrabandPaper-03-16-WebReady.pdf Year: 2016 Country: Canada URL: http://www.macdonaldlaurier.ca/files/pdf/MLILeuprechtContrabandPaper-03-16-WebReady.pdf Shelf Number: 145611 Keywords: Cigarette Smuggling CigarettesContraband GoodsContraband TobaccoIllegal CigarettesIllegal TobaccoOrganized CrimeTax Evasion |
Author: Luk, Rita Title: Contraband Cigarettes in Ontario Summary: This report documents the scope of the contraband cigarette market in Ontario and quantifies the extent of use and the financial impact on tax revenues of one source of contraband tobacco products - cigarettes purchased on First Nations reserves. The report also describes the characteristics of smokers who most frequently purchase untaxed or partially taxed cigarettes on reserves. Key findings are based on data for adult smokers surveyed from July 2005 to June 2006. At least 14% of cigarettes are bought on reserves; this is a conservative estimate of the use of contraband tobacco products, as it does not include contraband cigarettes sold off reserve. To maximize the effectiveness of tobacco tax policy and protect tax revenues, the authors suggest that the Ontario and federal governments will have to work collaboratively, and with First Nations communities, to develop solutions and implement measures to prevent contraband. Details: Toronto: Ontario Tobacco Research Unit, 2007. 37p. Source: Internet Resource: Accessed October 7, 2016 at: http://otru.org/wp-content/uploads/2012/06/special_nov_2007.pdf Year: 2007 Country: Canada URL: http://otru.org/wp-content/uploads/2012/06/special_nov_2007.pdf Shelf Number: 110502 Keywords: CigarettesContraband ProductsIllegal CigarettesTax EvasionTax Policy |
Author: Chiarini, Bruno Title: Is the Severity of the Penalty an Effective Deterrent? A Strategic Approach for the Crime of Tax Evasion Summary: In order to analyze the severity of sentencing, and to show how the probabilistic interpretation of strategic behavior can be tricky, this paper uses the crime strategic model (inspection game) proposed by Tsebelis. This model shows that any attempts to increase the severity of punishment will alter the payoff of the individuals involved, leaving unchanged the frequency of violation at equilibrium. This result is misleading: payoffs are not independent and the crime game can not be simply read with mixed strategies. These are inconclusive on how the players act rationally. This is undeniably true for the crime of tax evasion, where the dishonest taxpayers are rational agents, motivated by the comparison of payoffs, considering the risk of breaking the law. Although an irreducible minimum of uncertainty remains, the Nash equilibrium in mixed strategies provides us with the necessary information on equilibria in pure strategies that will be played. In this context, tougher sentencing deters crime, although, as the Italian historical experience teaches, the necessary condition required is the certainty of punishment and the ability of the government to enforce it. Details: Munich: Center for Economic Studies & Ifo Institute (CESifo, 2016. 19p. Source: Internet Resource: CESifo Working Paper No. 6112: Accessed October 19, 2016 at: https://ideas.repec.org/p/ces/ceswps/_6112.html Year: 2016 Country: Italy URL: https://ideas.repec.org/p/ces/ceswps/_6112.html Shelf Number: 145894 Keywords: DeterrenceFinancial CrimePunishmentTax EvasionWhite-Collar Crime |
Author: FICCI Title: Socio-Economic Impact of Counterfeiting, Smuggling and Tax Evasion in Seven Key Indian Industry Sectors: Executive Summary Summary: This report is a first ever compilation of facts and figures on counterfeiting, smuggling and tax evasion in seven key industry sectors in India. This research has deployed a methodology which is by far the most comprehensive till date, at least in India. Lakhs of data points have been analyzed and 129 existing sources have been referred and relied upon. The data crunching was followed by a robust validation exercise with relevant stake holders. This qualitative element is the most significant part of the research that needs to be emphasized before this audience and all those who read and make use of it. Our industry and government is very concerned about weak intellectual property protection and enforcement in India. The exponential growth of intellectual property (IP) crime has been illustrated very clearly by various studies and information from a variety of sources as well as the media. While counterfeiting used to consist primarily of apparel and other such items, the high profitability and low risk involved has allowed criminals, including organized crime rings, to become very active, counterfeiting virtually everything including, for instance, pharmaceutical products, electrical products, software, movies, food, wine, personal care products, automobile parts and luxury goods. While IP crime can lack, for some, the social stigma of many other criminal offences, this illegal activity is a drain on the economy and is responsible for loss of employment, a reduction in tax revenues for governments, and poses serious consumer health and safety risks due to the poor quality of products and sometimes hazardous nature of the fakes. Virtually no industry escapes this illegal activity. Details: New Delhi: FICCI, 2012. 9p. Source: Internet Resource: Accessed December 14, 2016 at: http://ficcicascade.com/studies.php?adjacents=10&page=4 Year: 2012 Country: India URL: http://ficcicascade.com/studies.php?adjacents=10&page=4 Shelf Number: 146104 Keywords: Counterfeit GoodsCounterfeitingOrganized CrimeSmuggling of GoodsTax Evasion |
Author: Jeffray, Calum Title: On Tap Europe: Organised Crime and Illicit Trade in Greece: Country Report Summary: Organised crime in Greece has historically been presented as an external threat, and the country’s vast coastline is indeed vulnerable to small-scale smuggling of various illicit goods from overseas, while its two major ports are frequently targeted by smugglers. As a result, Greece is widely cited as a key entry point for illicit goods into Europe, with the majority of illicit trade occurring in the regions where the two biggest cities and ports – Athens and Thessaloniki – are located. Illicit trade is not seen as an isolated problem in Greece, but as part of a broader category of economic crimes. It is closely linked to tax evasion, corruption and fraud. However, specific information on the scale and the scope of illicit trade in Greece is limited and tends to be largely anecdotal, reflecting a lack of publicly available information on organised crime more broadly. Authorities suggest that the way in which criminals in Greece organise themselves has evolved from strict, hierarchical structures to a more flexible ‘enterprise model’ in which a network of smaller OCGs is established for a particular operation. Groups that smuggle goods tend to deal across multiple commodities, moving between products based on the profit that can be made at any one time, regardless of the risk. Some illicit markets seem to be growing: data show that legitimate tobacco and alcohol sales are both decreasing, but there has not been a similar reduction in consumer demand. This paper makes various key findings. First, the debt crisis that has affected Greece since 2008 has undeniably had an impact on local illicit markets, making the black market more attractive to some consumers and affecting the resources available to law enforcement authorities. Second, during this period of economic uncertainty, authorities have focused on tackling crimes that they believe have the biggest impact on state revenues, such as tax evasion, excise evasion, fraud, and bribery and corruption. Third, Greece has become an attractive hub for smuggling activity for various reasons, including its combination of remote and porous land borders and its long coastline, the scale of operations at the port of Piraeus, which makes monitoring the content of incoming containers a challenge, and because the country is in the Schengen Area, which means that the circulation of goods into the rest of Europe is relatively straightforward. Fourth, there is only limited information available on the scale and scope of organised crime activity, and of illicit trade in particular. Finally, identifying 'little and often' smuggling operations, whether by sea or by land, requires an excellent intelligence picture, which Greece has struggled to achieve. Details: London: Royal United Services Institute for Defence and Security Studies, 2017. 51p. Source: Internet Resource: Occasional Paper; On Tap Europe Series No. 3: Accessed February 24, 2017 at: https://rusi.org/sites/default/files/201702_op_on_tap_europe3_greece.pdf Year: 2017 Country: Greece URL: https://rusi.org/sites/default/files/201702_op_on_tap_europe3_greece.pdf Shelf Number: 141207 Keywords: Corruption and FraudDrug Trafficking Illegal Tobacco Illicit Goods Illicit Trade Organized CrimeSmugglingTax Evasion |
Author: Goel, Rajeev K. Title: Growth in the Shadows: Effect of the Shadow Economy on U.S. Economic Growth over More Than a Century Summary: This paper provides a long-term view by studying the effect of the underground or shadow economy on economic growth in the Unites States over the period 1870 to 2014. Shadow activities might spur or retard economic growth depending on their interactions with the formal sector and impacts on the provision of public goods. Nesting the analysis in a standard neo-classical growth model, we use a relatively new time-series technique to estimate the short-run dynamics and long-run relationship between economic growth and its determinants. Results suggest that prior to WWII the shadow economy had a negative effect on economic growth; however, post-WWII the shadow economy was beneficial for growth. This ambiguity regarding the overall growth impact of the shadow economy is consistent with underlying theoretical arguments Details: Bonn, Germany: IZA Institute of Labor Economics, 2017. 22p. Source: Internet Resource: IZA DP No. 10705; Accessed May 4, 2017 at: http://ftp.iza.org/dp10705.pdf Year: 2017 Country: United States URL: http://ftp.iza.org/dp10705.pdf Shelf Number: 145311 Keywords: Economics and Crime Shadow Economy Tax Evasion |
Author: Anderson, Helen Title: Phoenix Activity: Recommendations on Detection, Disruption and Enforcement Summary: Phoenix activity occurs where the business of a failed company is transferred to a second (typically newly incorporated) company and the second company's controllers are the same as the first company's controllers. Phoenix activity can be legal as well as illegal. Phoenix activity is illegal where the controllers' intention is to shift assets from the predecessor company to the successor company to avoid liabilities such as unsecured debts, employee entitlements, taxes, adverse court judgments and fines. Phoenix activity has become a significant concern for governments because of the number of individuals promoting illegal phoenix activity, the significant loss of tax revenue it causes, and the recognition of the potentially devastating impact it has on creditors and employees. This report is the third by the authors dealing with phoenix activity. The first report examines the various historical attempts to define phoenix activity and identifies five categories of phoenix activity ranging from legitimate business rescue to complex illegal phoenix activity and provides examples of each. The second report captures all available data relating to the incidence, cost and enforcement of laws dealing with illegal phoenix activity. In this report, the authors propose reforms aimed at better detection, disruption, punishment and deterrence of illegal phoenix activity. Details: Melbourne, AUS: Melbourne Law School, 2017. 162p. Source: Internet Resource: Accessed May 26, 2017 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2924277 Year: 2017 Country: Australia URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2924277 Shelf Number: 145806 Keywords: Business CrimesCorruptionFinancial CrimesTax Evasion |
Author: Prieger, James E. Title: Cigarette Taxes and Illicit Trade in Europe Summary: Cigarettes are highly taxed in Europe to discourage tobacco use and to fund public-health measures to mitigate the harms from tobacco consumption. At higher prices (more precisely, at higher differentials between licit and black-market prices) consumers substitute more toward illicit cigarettes. Illicit retail trade in cigarettes (IRTC) includes counterfeiting and smuggling - either of legally purchased products, from lower-tax to higher-tax jurisdictions, or of entirely non-tax-paid cigarettes. The existing literature includes claims that taxes are not an important factor determining the scale of IRTC. We investigate these claims with data from 1999-2013 in the European Union. We find that while the simple correlation between licit cigarette prices and the market share of illicit cigarettes in consumption is negative, raising prices in any one country would, on average, lead to substantial increases in the expected illicit market share and volume in that country. A one euro increase in tax per pack in a country is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 25% to 120% of the average consumption. We also find that the role of prices in stimulating IRTC is, empirically, far more important than the role of corruption. The results are robust to a host of alternative specifications and sources of data. Details: Pepperdine University, School of Public Policy Working Papers, 2016. 77p. Source: Internet Resource: Accessed August 29, 2017 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2718519 Year: 2016 Country: Europe URL: Shelf Number: 146934 Keywords: CigarettesIllicit TradeTax EvasionTobacco |
Author: Australia. The Treasury Title: Black Economy Taskforce. Interim report Summary: The black economy is a significant, complex and growing economic and social problem. Black economy activities: undermine the community's trust in the tax system; create an unfair commercial environment which penalises businesses and individuals doing the right thing; enable and entrench the exploitation of vulnerable workers; undermine tax revenue; and enable abuse of the welfare system. If unchecked, increasing black economy participation can lead to a dangerous dynamic. It can foster a culture which legitimises and supports this participation, spurring its further growth. As revenues fall, those remaining in the formal economy may ultimately be faced with higher tax burdens, giving them a greater incentive to move into the shadows. All other OECD countries are grappling with the black economy issue. Australia is not alone. While the black economy is a long-standing problem, new vulnerabilities and threats are emerging as a result of fundamental economic, social and technological changes. The high cost of tax and non-tax regulatory burdens, pressure on business margins, the proliferation of new business models (including the sharing economy) and forms of work, complex interactions with illegal activities, exploitation of workers (including migrants), and changing social norms are influencing this landscape. The Australian Bureau of Statistics (ABS) estimated in 2012 that the black economy had grown to 1.5 per cent of GDP ($25 billion per year in today's dollars) in Australia. In the absence of a concerted and sustained whole-of-government effort, this figure can be expected to continue to grow. Given the linkages between different manifestations of the black economy, long-term multi-agency strategies and operations are needed. We must move beyond the business as usual mindset, recognising the limitations of traditional tax enforcement approaches. There is a clear need to act now. Community views on tax avoidance and evasion (particularly by large firms and multinationals) have noticeably hardened in recent years. At the same time, businesses, both large and small, are operating in a more competitive commercial environment, tempting some to push the boundaries (in their supply chain management, use of contractors and payment of wages). But this challenge is also an opportunity. With the intelligent application of emerging technologies, better use of data and a genuine whole-of-government focus, the tools we need are available. It is not too late, but we need to act now rather than wait. Business as usual is not an option. We can't audit our way out of this problem through traditional means. We have seen considerable innovation from other OECD countries in this area. A 21st century black economy strategy is needed in this country. The Black Economy Taskforce is a partnership between Australian Government agencies and the private sector. It is led by an independent chair and supported by a Secretariat in the Commonwealth Treasury. The Government has asked the Taskforce to develop a forward-looking, innovative and whole-of-government black economy strategy. This is our Interim Report, which sets out our initial findings and identifies a number of early actions. Our Final Report will be delivered to the Government in October 2017. Details: Canberra: The Taskforce, 2017. 74p. Source: Internet Resource: Accessed September 1, 2017 at: https://consult.treasury.gov.au/tax-framework-division/black-economy-taskforce/supporting_documents/BE_IR.pdf Year: 2017 Country: Australia URL: https://consult.treasury.gov.au/tax-framework-division/black-economy-taskforce/supporting_documents/BE_IR.pdf Shelf Number: 146999 Keywords: Black EconomyEconomic CrimesFinancial CrimesTax EvasionUnderground Economy |
Author: Alstadsaeter, Annette Title: Tax Evasion and Inequality Summary: This paper attempts to estimate the size and distribution of tax evasion in rich countries. We combine random audits - the key source used to study tax evasion so far - with new micro-data leaked from large offshore financial institutions - HSBC Switzerland ("Swiss leaks") and Mossack Fonseca ("Panama Papers" ) - matched to population-wide wealth records in Norway, Sweden, and Denmark. We find that tax evasion rises sharply with wealth, a phenomenon random audits fail to capture. On average about 3% of personal taxes are evaded in Scandinavia, but this figure rises to close to 30% in the top 0.01% of the wealth distribution, a group that includes households with more than $45 million in net wealth. A simple model of the supply of tax evasion services can explain why evasion rises steeply with wealth. Taking tax evasion into account increases the rise in inequality seen in tax data since the 1970s markedly, highlighting the need to move beyond tax data to capture income and wealth at the top, even in countries where tax compliance is generally high. We also find that after reducing tax evasion - by using tax amnesties - tax evaders do not legally avoid taxes more. This result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the very wealthy. Details: Cambridge, MA: National Bureau of Economic Research, 2017. 56p. Source: Internet Resource: NBER Working Paper No. 23772: Accessed September 11, 2017 at: http://www.nber.org/papers/w23772.pdf Year: 2017 Country: Europe URL: http://www.nber.org/papers/w23772.pdf Shelf Number: 147208 Keywords: Financial CrimeInequalityTax Evasion |
Author: Massachusetts. Commission on Illegal Tobacco Title: Report of Commission on Illegal Tobacco Summary: The Commission on Illegal Tobacco was established pursuant to section 182 of the Fiscal Year 2014 General Appropriations Act 20131 . The Commission was charged with the following tasks: To study and report on the illegal tobacco distribution industry in the commonwealth and the resulting loss of tax revenue. The commission shall investigate, report and make recommendations relative to: (1) the regulation, oversight, distribution and sale of all tobacco products sold in the commonwealth; (2) the illegal tobacco market in the commonwealth; (3) the loss of tobacco excise and sales tax revenues in the commonwealth as a result of the illegal tobacco market; (4) methods to maximize the collection of tobacco excise and sales tax revenues being lost to the illegal market; and (5) enforcement and penalties for violations of laws relative to the collection and reporting of all tobacco taxes under chapter 64C of the General Laws. The Commission was required to convene not later than November 1, 2013 and prepare a report detailing its findings and recommendations. In addition, the commission was charged with drafting the legislation necessary to carry recommendations into effect. All actions were to be concluded and recommendations filed with the clerks of the Senate and House of Representatives, the Chairs of the House and Senate Committees on Ways and Means, and the Senate and House Chairs of the Joint Committee on Revenue no later than March 1, 2014. During the 2013 legislative session, the Massachusetts Legislature created the Commission on Illegal Tobacco to study the economic impact of the illegal tobacco market on the Commonwealth of Massachusetts and make recommendations based on those findings. The Commission was charged with studying the regulation, oversight, distribution, and sale of all tobacco products in Massachusetts, investigating the illegal market, and determining the loss of tobacco excise and sales tax revenues in Massachusetts resulting from illegal market activities. The Commission was also tasked with making recommendations on how to maximize the collection of tobacco excise and sales tax revenues and on enforcement and penalties for violating laws related to the distribution and sale of tobacco products. Tobacco is illegally distributed and sold with the purpose of deriving illegal profits through tax avoidance. Tobacco taxes are imposed at both the federal and state levels. Violators avoid paying the tobacco excise and sales taxes in Massachusetts in multiple ways, including individual bootlegging, organized wholesale domestic smuggling, international smuggling, and counterfeits. In Massachusetts, the predominant method of tax avoidance is by smuggling tobacco products across the state border. The cigarette excise tax rate in Massachusetts is $3.51, comparable to rates in Connecticut and Rhode Island, but well above the rates in New Hampshire, Vermont, and Maine. In addition, the excise tax rate for cigars is 40% of the wholesale price while the excise tax rate for smokeless tobacco is 210% of the wholesale price. The difference between Massachusetts tax rates and other states' tax rates provides an economic opportunity to avoid Massachusetts taxes by smuggling. However, data2 shows that reducing Massachusetts tax rates is not a viable solution for combatting the avoidance of Massachusetts taxes, as that approach would not only reduce tax revenues but would also undermine public health objectives. Department of Revenue economists estimate that in 2012, between 7% and 20% of cigarettes consumed in the Commonwealth were untaxed. They predict the percentage of untaxed cigarettes will rise to between 8.3% and 27.5% due to the $1.00 rate increase. With the rate at $3.51, economists project Massachusetts will bring in an additional $157.5 million a year and that the annual revenue loss from tax avoidance will be in the range of $62 million to $246 million in excise taxes and an additional $12 and $49 million in sales tax revenues. Economists are unable to assess the impact of the illegal tobacco market on cigars, smoking tobacco, and smokeless tobacco (hereinafter referred to as "Other Tobacco Products") because there is a lack of hard data and literature on which to base estimates. Current state laws make it illegal to transport or sell any cigarettes in Massachusetts without the Massachusetts cigarette stamp. The Commonwealth has an encrypted stamping system which allows officials to scan cigarettes and track them. Auditors for the Department of Revenue conduct compliance drives three to four times a year; they visit licensed retailers and make sure those retailers are selling Massachusetts-taxed tobacco products. With more compliance drives over the past three years, voluntary compliance among licensed retailers has increased, leaving the Commission to deduce that a greater problem stems from unlicensed retailers and distributors selling illegal cigarettes. Such products are being transported from places with lower excise taxes including New Hampshire where the excise tax rate is only $1.78 per pack or even Virginia where the excise tax rate is just $0.30 per pack. To bring even one pack of cigarettes into Massachusetts without the state's excise tax stamp is illegal. When Department of Revenue auditors find a retailer selling illegal products, auditors have the authority to seize the goods, impose fines to collect taxes, and revoke tobacco licenses. However, the audit division does not conduct criminal investigations. Audit division staff must refer cases to a separate investigations unit within the Department of Revenue and work with outside agencies to pursue criminal charges. Also, auditors rely largely on tips from the public and have limited resources for ongoing investigations. Other Tobacco Products are not stamped in Massachusetts. When auditors conduct compliance checks, they have difficulty making sure Other Tobacco Products are legitimate and taxed. There is no way to verify that an invoice detailing the taxes paid on Other Tobacco Products are for the specific products found at the retailer at the time of a compliance check, as opposed to identical product acquired on which taxes have not been paid. Currently, there is no formal multi-agency taskforce combatting the illegal tobacco market in the Commonwealth. The Massachusetts State Police (MSP), along with the Federal Bureau of Alcohol, Tobacco, Firearms, and Explosives, and other agencies work alongside the Department of Revenue to handle criminal investigations as they arise. Their findings are then turned over to the Attorney General's Office for prosecution. The MSP has limited resources while conducting tobacco investigations including a lack of physical resources necessary to conduct an investigation, overtime costs, operational costs, and time constraints. The Department of Revenue also does not have the resources to conduct fulltime surveillance or stake out every case. In addition, ongoing cases drain limited resources over the long term. The Commission on Illegal Tobacco reviewed information on the overall tobacco market, the illegal tobacco market, revenue losses, enforcement powers and practices, and penalties for violating tobacco-related statutes and make a series of recommendations. Details: Boston: The Commission, 2014. 30p. Source: Internet Resource: Accessed November 13, 2017 at: http://www.mass.gov/dor/docs/dor/cigarette/pdfs/commissionreportonillegaltobacco.pdf Year: 2014 Country: United States URL: http://www.mass.gov/dor/docs/dor/cigarette/pdfs/commissionreportonillegaltobacco.pdf Shelf Number: 148153 Keywords: Cigarettes Illegal Tobacco Illicit Tobacco Tax EvasionTobacco |
Author: Martin, Rowan Title: Assessing the Extent and Impact of Illicit Financial Flows in the Wildlife and Tourism Economic Sectors in Southern Africa Summary: This study on Illicit Financial Flows (IFFs) in the Wildlife and Tourism sectors in Southern Africa emanated from the TrustAfrica (TA) and the Open Society Initiative for Southern Africa (OSISA) project "Assessing the extent and impact of illicit financial flows in key economic sectors in Southern Africa". The three components of the project are mining, agriculture and wildlife. IFFs are illicit movements from one country to another of money or products that are illegally acquired. The money typically originates from three sources in the private sector: commercial tax evasion, trade misinvoicing and abusive transfer pricing. However, other types of criminal activity can produce IFFs, which in this study include the trafficking of live animals and plants and their products and associated corruption (bribery and theft by corrupt government officials) through which the proceeds end up in another country. This wildlife trade and tourism IFF study is the first of its kind and the methodologies involved a combination of population modelling, estimated product offtakes and open source trade data. The trade research is limited to eight species groups - elephants, rhinos, lions, pangolins, crocodiles, abalone, sharks and rays, and cycads. The study concluded that for the period 2006-2014, Southern Africa lost almost US$ 1.5 billion in illicit transfers of funds or products overseas, or close to 50% of all wildlife commodity exports. Surprisingly, illegal exports of abalone meat made up almost half of this amount. The IFFs in the wildlife tourism sector were much larger, estimated at over US$ 22 billion in the ten years 2006-2015, and deriving mainly from tax evasion and trade misinvoicing, sometimes involving offshore shell companies. We predicted that more than US$3 billion could have been lost in 2016 in the eight countries covered in this study. The main causes of the huge losses to the economies of Southern Africa in wildlife trade were CITES trade bans and the fact that local communities were not empowered to manage what should rightfully be their resources on their land. Trade bans and disenfranchisement led communities to harvest illegally and to sell wildlife products to illegal exporters. The only way to mitigate these losses would be to do away with trade bans, bring most species into the legal sector, and establish supply and demand regulatory systems that would ensure conservation of the species while also satisfying legitimate stakeholder interests, primarily those of communities and enterprises that live in association with the wildlife and which share common habitats. Note: Disclaimer: The findings in this report do not necessarily reflect the views of TA and OSISA. Details: TrustAfrica and the Open Society for Southern Africa (OSISA), 2017. 177p. Source: Internet Resource: Accessed February 8, 2018 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2996874 Year: 2017 Country: Africa URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2996874 Shelf Number: 149025 Keywords: Financial CrimesIllegal Wildlife TradeIllicit Financial FlowsTax EvasionTrafficking in WildlifeWildlife CrimeWildlife Trafficking |
Author: Alvarez Marsal Corporate Performance Improvement LLP Title: Causes and Control of Illicit Tobacco Summary: The debate about the adverse health effects of tobacco is over and the health impacts are well understood. However, the debate about the relationship between high and increasing taxes on tobacco, illicit trade, organised crime and enforcement has many protagonists and is not over. This is an important issue given the broad and adverse impacts of illicit activity, ranging from lost tax revenue, to undermining health objectives, to the funding of organised crime and terrorist activities. Intergovernmental organisations such as the World Customs Organization (WCO), the World Health Organization (WHO), the Organisation for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF) and international organisations such as Europol and INTERPOL are rightly focused on this issue. It is critically important that global alignment is established around the Based on analysis of a representative sample of 28 countries, including the world's major cigarette markets (excluding China), and on analysis of all U.S. states where data are available, affordability, measured as the proportion of disposable income required to purchase cigarettes, emerges as a principal driver of illicit trade in tobacco. Both the multicountry analysis and the pan-U.S. state analysis revealed a strong correlation between affordability and the size of illicit trade as a proportion of total consumption. By analogy, an analysis conducted on alcoholic beverages, arguably the closest product category to tobacco, also shows a strong relationship between illicit alcohol consumption and alcohol affordability. Tobacco affordability itself is determined by a combination of retail pricing and disposable income. Alvarez & Marsal's (A&M)'s analysis shows that while disposable income changes have played a real role, particularly during the economic crisis, the principal driver of affordability declines has been retail price increases, with increases in taxation being the main driver of the extent and pace of retail price increases. We conclude therefore that tobacco tax increases have been a key driver of growth in the illicit tobacco trade. Furthermore, analysis of the dynamics of tax and price increases indicate that (a) countries that experience sudden affordability Relationship Between Tobacco Tax Policy and Illicit Trade declines, usually caused by substantial tax-induced retail price increases, and/or (b) countries that are in close geographical proximity and have easy access to lower-priced alternative product from other countries, are more susceptible to growth in illicit trade. This is evidenced by many countries, for example, Latvia, which has relatively high illicit consumption despite having relatively good affordability, but which borders lower-priced Russia and Belarus; Brazil which is impacted by easy access to illicit supply from Paraguay; and more recently by the impact of the November 2015 excise duty increase in Malaysia. The analysis also demonstrates the importance of enforcement in controlling illicit trade. We have created a composite index comprising the degree of regulatory enforcement and the effectiveness of the criminal justice system country by country. The analysis shows that in countries where enforcement is strong, the scale of illicit trade can be controlled even where taxation is at higher levels. Conversely, where enforcement is weak, the scale of illicit trade can be high even in lower tax countries. Moreover, an examination of countries with broadly similar levels of affordability shows that the scale of illicit trade is greater in countries with weaker enforcement and smaller in countries with stronger enforcement causes of the problem and around the solutions. Details: s.l.: Alvarez & Marsal, 32p. Source: Internet Resource: Accessed February 14, 2018 at: https://www.alvarezandmarsal.com/sites/default/files/am_jti-smokingsummary_finalweb.pdf Year: 2017 Country: International URL: https://www.alvarezandmarsal.com/sites/default/files/am_jti-smokingsummary_finalweb.pdf Shelf Number: 149128 Keywords: Illegal Cigarettes Illegal Tobacco Trade Illicit Tobacco Illicit Trade Organized Crime Tax EvasionTechnology Tobacco Industry |
Author: African Union Commission. Department of Economic Affairs Title: Mobilisation of Domestic Resources: Fighting against Corruption and Illicit Financial Flows Summary: Illicit financial flows and corruption have long been at the centre of discussions on development in Africa, particularly due to the existence of a wide consensus on their negative impacts on development financing in Africa. It is now so widespread that Africa loses USD 50 billion annually. However, this figure is well below reality due to the difficulty in obtaining reliable statistics, and the secretive nature of such funds. The African Union's initiative to dedicate the year 2018 to combatting corruption under the theme "Winning the Fight against Corruption: A Sustainable Path for Africa's Transformation" is eloquent proof of the willingness of the African Union to combat poor financial governance, which affects the Continent's inclusive socio-economic development of the, as illicit financial flows are obstacles to productive investments, resulting in distortions in allocations of budgetary resources, and systematically increasing inequalities. The mobilization of adequate resources is essential in order for Africa to emerge from its weak economic conditions, and increase the level of development of its populations. Indeed, after two decades (80s and 90s) of weak growth with a nearly zero average, Africa has experienced strong economic growth, despite the recent downturn observed with the decline in commodity prices. The average growth rate has been around 5% since 2000, with considerable heterogeneity in growth patterns between countries, at a time when other regions have experienced a decline or stagnation in their economic activity. However, this growth has not substantially reduced poverty and inequality or led to job creation. The processes for industrialization, economic diversification and the modernization of agriculture have also been very limited. Despite progress made, more than 50% of the African population is living on less than USD 1.9/day, that is, about 389 million people (World Bank, 2016). In terms of income distribution, six of the top ten most unequal countries in the world were located in Africa, particularly in Southern Africa, with a GINI coefficient increasing from 0.42 to 0.46 between 2000 and 2010 (African Development Bank, 2012). Africa's infrastructure needs range from USD 130 to 170 billion per year (Authorized Economic Operator, 2018). On the basis of these findings and in view of the current limited budgetary resources and the scarcity of development aid, African countries should explore options for mobilizing domestic resources to finance productive activities, generate growth and mitigate the increasing social demands as a result of the continuing unprecedented population growth. This should start with the recovery of funds lost through illicit financial flows to invest in the social sectors (education, health, social safety nets, etc.) in order to rapidly harness the demographic dividend, and to place the Continent on the path to rapid, inclusive and sustainable growth. The African Union could address the issue at political level by putting in place a common continental strategy on which national strategies will be anchored, and by advocating for the strengthening of international cooperation in combatting tax evasion, money laundering, crime, corruption, false invoicing and mispricing of imported or exported goods practices. This paper takes stock of illicit financial flows and corruption in Africa, with a detailed presentation at regional and country levels. It is structured as follows: the first part essentially discusses the importance of domestic resource mobilization, and combatting corruption and illicit financial flows (IFFs) to ensure the sustainable development of Africa. The second part takes stock of the IFFs in Africa based on data provided by the organization, Global Financial Integrity (GFI). The third part addresses the issue of corruption and financial mismanagement in Africa, and the last part proposes recommendations Details: African Union (Addis Ababa ), 2018. 24p. Source: Internet Resource: Accessed April 25, 2018 at: http://iffoadatabase.trustafrica.org/iff/paper_2018_mobilization_of_domestic_resources_fighting_against_corruption_iff_english_0.pdf Year: 2018 Country: Africa URL: http://iffoadatabase.trustafrica.org/iff/paper_2018_mobilization_of_domestic_resources_fighting_against_corruption_iff_english_0.pdf Shelf Number: 149884 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Prieger, James E. Title: Tax Evasion and Illicit Cigarettes in California. Part II - Smokers' Intended Responses to a Tax Increase Summary: We examine recent survey data from California to investigate smokers' intended responses to an increase in cigarette excise taxes rates, including tax avoidance and the economic crimes of tax evasion and illicit trade in tobacco products (ITTP). We estimate how tax avoidance, tax evasion, and ITTP might change in response to a recent tax increase. We examine how such intended behaviors vary across demographic groups and how they are related to factors pertaining to the cost of engaging in ITTP. Half of smokers intend to act in ways that undermine, at least partially, the public health rationale for raising tobacco taxes. On the other hand, 73.5% intend to reduce their nicotine use or substitute the use of less harmful delivery systems for cigarette smoking. Details: Los Angeles: BOTEC Analysis, 2018. 40p. Source: Internet Resource: Accessed July 16, 2018 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3181617 Year: 2018 Country: United States URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3181617 Shelf Number: 150887 Keywords: Black Markets Cigarettes Counterfeit Cigarettes Counterfeit Goods Illicit Cigarettes Illicit Tobacco Shadow Economy Tax Evasion |
Author: Mousseau, Frederic Title: The Great Timber Heist Continued: Tax Evasion and Illegal Logging in Papua New Guinea Summary: This report makes public new evidence of financial misreporting and tax evasion in the logging industry in Papua New Guinea (PNG). Following the Oakland Institute's 2016 report, which alleged that financial misreporting by foreign firms resulted in nonpayment of hundreds of millions of dollars in taxes, the new report reveals drastic worsening of this pattern in recent years. According to the financial records, the 16 studied subsidiaries of PNG's largest log exporter, the Malaysian Rimbunan Hijau (RH) Group, have doubled their financial losses in just six years while increasing their exports of tropical timber by over 40 percent. The new report also analyses the effect of the progressive tax rate on log exports introduced in 2017 by the PNG government to address concerns around tax evasion. PNG's Minister of Forests and the forest industry have argued that this new tax has brought the industry to "the brink of disaster," resulting in "vanishing" tax revenue for the country. However, the Oakland Institute's latest report clearly refutes these claims showing that the tax increase has generated additional fiscal revenue while contributing to an overall drop in exports in 2017. The increase in log exports in recent years by PNG is largely the result of illegally-granted Special Agriculture and Business Leases (SABLs), which added 5.5 million hectares of land to the ten million hectares already under active logging concession. Despite the 2014 government's promise that all illegal deals would be canceled, to date no decisive action has been taken to stop illegal logging or return land to the people. Details: Oakland, CA: The Oakland Institute, 2018. 18p. Source: Internet Resource: Accessed September 12, 2018 at: https://www.oaklandinstitute.org/sites/oaklandinstitute.org/files/great_timber_heist_cont.pdf Year: 2018 Country: Papua New Guinea URL: https://www.oaklandinstitute.org/great-timber-heist-continued-papua-new-guinea Shelf Number: 151492 Keywords: Environmental CrimesForestsIllegal LoggingTax Evasion |
Author: Global Financial Integrity Title: Kenya: Potential Revenue Losses Associated with Trade Misinvoicing Summary: Trade misinvoicing is a reality impacting Kenya and every other country of the world. Imports coming into a country can be over-invoiced in order to shift money abroad. Or imports can be under-invoiced in order to evade or avoid customs duties or VAT taxes. Similarly, exports going out of a country can be under-invoiced in order to shift money abroad. And exports are occasionally over-invoiced, for example in order to reclaim VAT taxes. Global Financial Integrity finds that trade misinvoicing is the most frequently utilized mechanism facilitating measurable illicit financial flows. Misstating import and export values has become normalized in much of commercial trade, and the same facilitating shadow financial system is used to move money of criminal and corrupt origin. We are dealing with a systemic problem that merits serious concerted attention. Parties to trade who engage in misinvoicing do so because it is profitable to them. That is, they will incur some costs (including the expected cost of getting caught) but do so because the expected benefits to them of misinvoicing are larger than their expected costs. While those parties benefit from misinvoicing, there are additional social costs to nations affected by such activity. Trade misinvoicing redirects economic resources away from their most productive use (i.e., it is a type of "rent-seeking" activity) and that can result in social inefficiencies in the allocation and distribution of resources. While any country may be affected by misinvoicing, the problem is particularly acute for developing countries where productive capacities may already be limited. The social costs of misinvoicing can undermine sustainable growth in living standards in developing countries as well as exacerbate already pronounced inequities in the distribution of income and wealth. Moreover, by depressing government revenues and exacerbating inequality, those social costs can also impede progress in the developing world on important social goals, such as poverty reduction. In this analysis we seek to provide an approximate measure of revenues lost to the Kenyan government due to trade misinvoicing. We illustrate this in the first section of the report for 2013 (the last year for which comprehensive data for Kenya are available). For that year, we can reasonably identify potential revenue losses in excess of US$907 million, or about 8 percent of total Kenyan government revenues. That is a conservative figure, as it does not encompass many aspects of trade misinvoicing and other illicit financial flows that do not show up in official statistics. Moreover, the detailed data available for estimating trade misinvoicing in Kenya comprise a fraction of all of that country's trade flows. Furthermore, we take one aspect of this problem - import under-invoicing - and subject it to detailed analysis utilizing detailed bilateral trade data. We find that Kenyan imports of cereal from Pakistan, mineral fuels from India and, more generally, imports from China to be particularly prone to potential revenue loss to the government of Kenya due to under-invoicing. All researchers on this issue of trade misinvoicing are constantly seeking better data and better analytical methodologies. Even as we work toward these goals, what is most important is to appreciate the order of magnitude of the problem and the potential for development revenues if the problem is curtailed. Recognizing the shortcomings in data, Global Financial Integrity has developed GFTrade, a database of current world market prices of 80,000 categories of goods in the Harmonized System, as traded by 30 of the largest global economies. This enables emerging market and developing country customs and revenue authorities to assess instantly the risk that trade misinvoicing may be a reality in transactions as they are coming in or going out. GFTrade is in use in Africa now. Details: Washington, DC: Global Financial Integrity, 2018. 32p. Source: Internet Resource: Accessed October 10, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/GFI-Kenya-Potential-Revenue-Losses-Associated-with-Trade-Misinvoicing.pdf Year: 2018 Country: Kenya URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/GFI-Kenya-Potential-Revenue-Losses-Associated-with-Trade-Misinvoicing.pdf Shelf Number: 152890 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: Global Financial Integrity Title: A Scoping Study of Illicit Financial Flows Impacting Uganda Summary: Insufficient levels of financial transparency-globally and domestically-and government accountability in Uganda, coupled with a regulatory system that can incentivize financial crimes, are helping to drive high levels of illicit financial inflow and outflows in the country, which are undermining development efforts. Uganda will struggle to meet its goal of rising to middle income status and reducing its reliance on foreign debt unless it increases efforts to combat the commercial tax evasion, corruption, and money laundering of criminal proceeds and terrorist financing. Three policy areas should be the central focus for the government: eliminate the allowance and use of anonymous companies in the economy, reduce the ease and volumes of trade misinvoicing, and enforce anti-money laundering laws, particularly within the banking sector. Illicit financial flows (IFFs) in Uganda are part of a broader political economy dynamic where continued economic growth and development are hampered by corruption, impunity, and an opaque extractive sector. The growth in Uganda's economy and its role as a haven for legal and illegal activities stemming from neighboring countries like South Sudan, create perverse opportunities for illicit financial flows. The central government has a decent capacity to combat these opportunities for IFFs on paper, but its willingness or capacity to act to curtail IFFs is lagging. Trade misinvoicing is the most significant area of illicit financial flows in Uganda that can be estimated using publicly available data. From 2006-2015, the latest years for which the necessary data are available, potential trade misinvoicing amounted to roughly 18 percent of total Ugandan trade over the ten-year period. The figure for possible outflows is some 10 percent of total trade, and for possible inflows it is around 8 percent of total trade (2006-2015). Viewed in dollar terms, the potential over- and under-invoicing of imports from 2006-2015 was approximately US$4.9 billion, and over- and under-invoicing of exports may have reached US$1.7 billion. Uganda's laws and regulations on financial transparency and anti-money laundering have the strongest influence on illicit financial flows, and there are notable gaps in the framework the Government of Uganda has in place to address the sources, transfer methods, and motivations of IFFs in the country. In particular, laws governing corporations in Uganda are generally weak in so far as they do not require the official identification of the beneficial owners of companies or the complete identity of all shareholders in a company. The government's anti-money laundering regime mostly exists on paper and could do with strengthening. The Financial Intelligence Authority, which was only recently established, acknowledges this shortcoming and is working to enhance its performance in helping to prevent, track, and prosecute money laundering in the country. Uganda's extractive sector and the presence of numerous transnational crime markets add to the importance of both financial transparency and anti-money laundering. Details: Washington, DC: GFI, 2018. 80p. Source: Internet Resource: accessed October 16, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/A-Scoping-Study-of-Illicit-Financial-Flows-Impacting-Uganda.pdf Year: 2018 Country: Uganda URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/A-Scoping-Study-of-Illicit-Financial-Flows-Impacting-Uganda.pdf Shelf Number: 152979 Keywords: Corporate CorruptionCorporate CrimeFinancial CrimeIllicit Financial FlowsMoney LaunderingTax EvasionTerrorist financing |
Author: Global Financial Integrity Title: Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing Summary: Analysis of trade misinvoicing in Nigeria in 2014 shows that the potential loss of revenue to the government was approximately $2.2 billion for the year, according to a new study by Global Financial Integrity. To put this figure in context, this amount represents four percent of total annual government revenue as reported to the International Monetary Fund. Put still another way, the estimated value gap of all imports and exports represents approximately 15 percent of the country's total trade. The report, titled Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing, analyzes Nigeria's bilateral trade statistics for 2014 (the most recent year for which sufficient data are available) which are published by the United Nations Comtrade. The detailed breakdown of bilateral Nigerian trade flows in Comtrade allowed for the computation of trade value gaps that are the basis for trade misinvoicing estimates. Import gaps represent the difference between the value of goods Nigeria reports having imported from its partner countries and the corresponding export reports by Nigeria's trade partners. Export gaps represent the difference in value between what Nigeria reports as having exported and what its partners report as imported. The portion of revenue lost due to the misinvoicing of exports was $1.3 billion during the year which was related to a reduction in corporate income taxes. The portion of revenue lost due to the misinvoicing of imports was $880 million. This amount can be further divided into its component parts: uncollected VAT tax ($100 million), customs duties ($365 million), and corporate income tax ($415 million). Lost revenue due to misinvoiced exports was $1.3 billion for the year which is related to lower than expected corporate income and royalties. "The practice of trade misinvoicing has become normalized in many categories of international trade" according to GFI President Raymond Baker. "It is a major contributor to poverty, inequality, and insecurity in emerging market and developing economies. The social cost attendant to trade misinvoicing undermines sustainable growth in living standards and exacerbates inequities and social divisions, issues which are critical in Nigeria today." Examination of the underlying commodity groups which comprise Nigeria's global trade show that a large amount of lost revenue ($200 million) was related to import under-invoicing of just five product types. Those products and the related estimated revenue losses include: vehicles ($100 million), iron and steel products ($40 million), electrical machinery ($20 million), ceramics ($20 million), and aluminum products ($20 million). Lost revenue due to mispriced exports ($1.3 billion) may be related to the mineral fuels trade given this category of goods makes up over 90 percent of all exports. Trade misinvoicing occurs in four ways: under-invoicing of imports or exports, and over-invoicing of imports or exports. In the case of import under-invoicing fewer VAT taxes and customs duties are collected due to the lower valuation of goods. When import over-invoicing occurs (i.e. when companies pay more than would normally be expected for a product), corporate revenues are lower and therefore less income tax is paid. In export under-invoicing the exporting company collects less revenue than would be anticipated and therefore reports lower income. Thus, it pays less income tax. Corporate royalties are also lower. Total misinvoicing gaps related to imports can be broken down by under-invoicing ($2.4 billion) and over-invoicing ($1.9 billion). It should be noted that these figures represent the estimated value of the gap between what was reported by Nigeria and its trading partners. The loss in government revenue is a subset of these amounts and is based on VAT tax rates (5 percent), customs duties (15.2 percent), corporate income taxes (22.4 percent), and royalties (.2 percent) which are then applied to the value gap. Export misinvoicing gaps were a massive $5.9 billion for export under-invoicing and $5.6 billion for export over-invoicing. Lost corporate income taxes and royalties are then applied to export under-invoicing amounts to calculate lost government revenue. Details: Washington, DC: GFI, 2018. 32p. Source: Internet Resource: Accessed November 3, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/Nigeria-Report-2018.pdf Year: 2018 Country: Nigeria URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/Nigeria-Report-2018.pdf Shelf Number: 153244 Keywords: Corporate CrimeCorrupt PracticesFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Global Financial Integrity Title: Illicit Financial Flows to and from 148 Developing Countries: 2006-2015 Summary: This is the latest in a series of reports, issued on a roughly annual basis by Global Financial Integrity (GFI), which provides country-level estimates of the illicit flows of money into and out of 148 developing and emerging market nations as a result of their trade in goods with advanced economies, as classified by the International Monetary Fund. Such flows - hereafter referred to as illicit financial flows (IFFs)-are estimated over the years from 2006 to 2015, the most recent ten year period for which comprehensive data are available. In addition to updating the estimated IFFs GFI has presented in the past, this report widens the scope of its research and uses a more detailed database published by the United Nations (UN) along with updated measures from the International Monetary Fund (IMF) data it has used previously. This report presents estimates of IFFs based on both data sets. GFI defines IFFs as "money that is illegally earned, used or moved and which crosses an international border." Currently, the World Bank, IMF, UN, and the OECD use a similar definition. This study underscores the point that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies. As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world. Details: Washington, DC: GFI, 2019. 56p. Source: Internet Resource: Accessed February 18, 2019 at: https://www.gfintegrity.org/wp-content/uploads/2019/01/GFI-2019-IFF-Update-Report-1.29.18.pdf Year: 2019 Country: International URL: https://www.gfintegrity.org/wp-content/uploads/2019/01/GFI-2019-IFF-Update-Report-1.29.18.pdf Shelf Number: 154642 Keywords: Corporate CorruptionCorporate CrimeFinancial CrimeIllicit Financial FlowsMoney LaunderingTax EvasionTerrorist financingTrade Misinvoicing |
Author: Battaglini, Marco Title: Tax Professionals: Tax-Evasion facilitators or Information Hubs? Summary: To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for tax evasion; and informational externalities generated by the tax professional activities. We provide evidence supporting the simultaneous presence of both mechanisms. Details: Cambridge, MA: National Bureau of Economic Research, 2019. 52p. Source: Internet Resource: NBER Working Paper 25745: Accessed April 15, 2019 at: https://www.nber.org/papers/w25745.pdf Year: 2019 Country: Italy URL: https://www.nber.org/papers/w25745.pdf Shelf Number: 155421 Keywords: Economic Crimes Financial Crimes Tax Evasion |
Author: KPMG Title: Eurasian Economic Union Illicit Cigarette Report Summary: Key findings: Illicit cigarette consumption has grown rapidly in the Eurasian Economic Union from 2015 to 2018 - Illicit cigarette consumption rose from 0.6% to 6.8% of total consumption in the past 4 years, representing over 20bn cigarettes in 2018 - Had these cigarettes been sold legally in 2018, an additional 68bn RUB would have been collected in taxes (VAT & Excise) across the Eurasian Economic Union in 2018, with 99% of the taxes lost from Russia - A large proportion of the growth occurred in the Russian Federation, where non-domestic cigarette consumption increased from 0.7% to 8.7% of consumption, of which 90% was illicit. Widening price differences between countries and free movement of goods and people are two possible drivers behind the growth in illicit cigarette consumption - The price differences (in particular between Belarus and Russia) have increased by over 40%, making cigarettes from Belarus more affordable(с) - In addition, the establishment of the EEU (in 2015) enabled free movement of goods and people, reducing customs inspections between countries and removing limits on goods imported for personal consumption - The 8 billion Belarusian labelled cigarettes identified in Russia were not supported by the number of travellers buying for their own personal consumption, indicating that a high volume of cigarettes are contraband. Furthermore the seizures of millions of Belarusian labelled cigarettes in Russia indicated that these cigarettes are transported by criminal networks. Distributors of illicit cigarettes have grown to exploit the price differences, reduced affordability and the lack of personal allowance quotas when travelling between EEU countries, especially from Belarus to Russia - Belarus is the primary source of illicit cigarettes, with almost 8 billion of the 20 billion illicit cigarettes identified in this study coming from Belarusian trademark-owned manufacturers, whilst production capacity was reported at 29 billion cigarettes(4) which is not supported by domestic consumption (estimated at 16 billion) - Belarusian labelled cigarettes were identified across Russia, indicating that they are being purchased by consumers who are not travelling across the Belarusian border - In addition, 47% of C&C identified had no identifiable origin including counterfeit, illicit whites and cigarettes with suspicious Russian tax stamps, which have had no taxes paid in any jurisdiction. Some may be illegally manufactured inside Russia - Illicit cigarette smuggling has been shown to help enable Organised Criminal Groups (OCGs), using similar networks to sell other products and its rapid growth in EEU is unlikely to be any different, as profits can be high whilst penalties remain low. Throughout the report, our analysis has focussed on the following categories of cigarette consumption: Legal domestic consumption - Cigarettes legally purchased and consumed within the country of study, based on In Market Sales data provided by the tobacco industry Non-domestic legal (ND(L)) - ND(L) represents cigarettes which are purchased in another country but legally consumed in the country of study, through cross-border or tourism purchases. This represents 0.8% of total consumption in the EEU Illicit consumption - divided into three components: - Illicit Whites: Cigarettes that are usually manufactured in one country/market but which the evidence suggests have been smuggled across borders during their transit to the destination market under review where they have limited or no legal distribution and are sold without payment of tax - Contraband (Other): Cigarettes where the tax was paid legally in one country, but the cigarettes were taken to another country and re-sold without any applicable tax, mainly when the excise tax regimes in the source country are lower than the destination country. Many of these cigarettes originated from an EEU country and whilst they were legally transported (due to no legal personal allowance limits) they were then re-sold illegally - Counterfeit: Cigarettes that deliberately copy a legally traded brand, deceiving consumers who believe that they are purchasing this brand. Counterfeit was only identified by participating trademark owners in the Empty Pack Survey - Russian suspicious tax stamps: Cigarettes where further analysis has revealed that the packs may have been sold without the payment of tax, despite bearing domestic labelling Details: London: Author, 2019. 48p. Source: Internet Resource: Accessed June 28, 2019 at: https://www.stopillegal.com/docs/default-source/external-docs/eea-illicit-cigarette-report-2018-english.pdf?Status=Temp&sfvrsn=ab4677d7_2 Year: 2019 Country: Europe URL: https://www.stopillegal.com/docs/default-source/external-docs/eea-illicit-cigarette-report-2018-english.pdf?Status=Temp&sfvrsn=ab4677d7_2 Shelf Number: 156923 Keywords: AsiaCigarettes ContrabandCounterfeit Cigarettes Counterfeit Goods EuropeIllicit Cigarettes Illicit Markets Illicit Trade Organized Crime Tax Evasion Tobacco |
Author: Almeida, Lucas da Silva Title: Dark Networks and Corruption: Uncovering the Offshore Industry Summary: Among the many social structures that cause inequality, one of the most jarring is the use of loopholes to both launder money and evade taxation. Such resources fuel the "offshore finance" industry, multi-billion dollar sector catering to many of those needs. These run under the logic of "Dark Networks" avoiding detection and oversight as much as possible. While there are legitimate uses for offshore services, such as protecting assets from unlawful seizures, they are also well documented pipeline for money stemming from illegal activities. These constructs display a high amount of adaptiveness and resilience and the few studies done had to use incomplete information, mostly from local sources of criminal proceedings. This work is to analyze the network of offshore accounts leaked under the Panama Papers report by the International Consortium of Investigative Journalists. This registers the activities of the Mossack Fonseca law firm in Panama, one of the largest in the world on the Offshore field. It spans over 50 years and provides us with one of the most complete overview thus far of how these activities are connected, the topology of such network and what it displays in resilience against attempts to target this scheme. Details: Sao Paulo: Universidade de Sao Paulo, 2018. 56p. Source: Internet Resource Master's Dissertation (in Portuguese): Accessed July 16, 2019 at: http://www.teses.usp.br/teses/disponiveis/100/100132/tde-09042018-210047/pt-br.php Year: 2018 Country: Brazil URL: http://www.teses.usp.br/teses/disponiveis/100/100132/tde-09042018-210047/pt-br.php Shelf Number: 156805 Keywords: Asset Seizure Dark Networks Financial Crime Money Laundering Offshore Accounts Panama Papers Shell Companies Tax Evasion |