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Date: April 30, 2024 Tue
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Results for trade misinvoicing
6 results foundAuthor: Global Financial Integrity Title: South Africa: Potential Revenue Losses Associated with Trade Misinvoicing Summary: Executive Summary This report analyzes South Africa's bilateral trade statistics for 2010 - 2014 (the most recent years for which sufficient data are available) which are published by the United Nations (Comtrade). The detailed breakdown of bilateral South African trade flows 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 South Africa reports having imported from its partner countries and the corresponding export reports by South Africa's trade partners. Export gaps represent the difference in value between what South Africa reports as having exported and what its partners report as imported. Analysis of trade misinvoicing in South Africa from 2010-2014 shows that the potential loss of revenue to the government is $7.4 billion annually or, a total of $37 billion during the period. The average portion of revenue lost due to import misinvoicing each year is $4.8 billion. This amount can be further divided into its component parts: uncollected VAT tax ($2.1 billion), customs duties ($596 million), and corporate income tax ($2.1 billion). Lost revenue due to misinvoiced exports was $2.6 billion on average each year which is related to lower than expected corporate income and royalties. The study also examined trade data from the South African Revenue Service in order to conduct an in-depth examination of import under-invoicing. This process analyzed approximately 7.4 million trade transactions which included more than 8,200 commodity types for the period 2010-2015. A key conclusion is that goods categories with a preponderance of under-invoicing tend to be associated with higher effective tax rates than other classes of imports. The data show that the top five categories for potential revenue loss related to import under-invoicing are machinery, knitted apparel, electrical machinery, non-knitted apparel, and vehicles. Three of these commodities (machinery, electrical machinery, and vehicles) are among the most commonly imported goods into South Africa. 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 ($16.3 billion) and over-invoicing ($9.8 billion). It should be noted that these figures represent the estimated value of the gap between what was reported by South Africa and its trading partners. The loss in government revenue is a subset of these amounts and is based on VAT tax rates (12.9 percent), 2 Global Financial Integrity customs duties (3.7 percent), corporate income taxes (21.7 percent), and royalties (1 percent) which are then applied to the value gap. Export misinvoicing gaps were $11.6 billion for export under-invoicing and $8.6 billion for export over-invoicing. Lost corporate income taxes and royalties are then applied to export under-invoicing amounts to calculate lost government revenue. The practice of trade misinvoicing has become normalized in many categories of international trade. 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 South Africa today. Details: Washington, DC: Global Financial Integrity, 2018. 30p. Source: Internet Resource: Accessed February 8. 2019 at: https://www.gfintegrity.org/report/south-africa-potential-revenue-losses-associated-with-trade-misinvoicing/ Year: 2018 Country: South Africa URL: https://www.gfintegrity.org/wp-content/uploads/2018/11/South-Africa-Report-2018.pdf Shelf Number: 154289 Keywords: Custom DutiesFinancial CrimesFinancial FraudRevenue LossesSouth AfricaTax FraudTrade MisinvoicingUnderinvoicing |
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: Global Financial Integrity Title: India: Potential Revenue Losses Associated with Trade Misinvoicing Summary: In a comprehensive study on the level of trade misinvoicing in India in 2016, GFI found that the estimated potential tax revenue losses to the Indian Government that year is US$13.0 billion, equivalent to 5.5 percent of the value of India's total government revenue collections in 2016. Trade misinvoicing is a method for moving money illicitly across borders which involves the deliberate falsification of the value, volume, and/or type of commodity in an international commercial transaction of goods or services by at least one party to the transaction and constitutes the largest component of illicit financial flows as measured by GFI. Using a trade gap analysis, GFI was able to break down the estimated potential tax revenue losses to misinvoicing by measuring illicit financial inflows and outflows for both import and export under- and over-invoicing. GFI estimates that the value of the trade gap for misinvoiced goods equals US 74 billion dollars, or 12 percent of the country's total trade of US 617 billion dollars in 2016. Details: Washington, DC: Global Financial Integrity, 2019. 44p. Source: Internet Resource: Accessed June 17, 2019 at: https://gfintegrity.org/report/india-potential-revenue-losses-associated-with-trade-misinvoicing/ Year: 2019 Country: International URL: https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2019/06/India-2019.pdf?time=1560599321 Shelf Number: 156371 Keywords: Financial Crime Financial Fraud India Tax Evasion Tax Revenue Trade Misinvoicing |
Author: Global Financial Integrity Title: Egypt: Potential Revenue Losses Associated with Trade Misinvoicing Summary: In a comprehensive study on the level of trade misinvoicing in Egypt in 2016, GFI found that the estimated potential tax revenue losses to the Indonesian government that year is approximately US$1.6 billion, equivalent to 4.1 percent of the value of Egypt's total government revenue collections in 2016. Trade misinvoicing is a method for moving money illicitly across borders which involves the deliberate falsification of the value, volume, and/or type of commodity in an international commercial transaction of goods or services by at least one party to the transaction and constitutes the largest component of illicit financial flows as measured by GFI. Using a trade gap analysis, GFI was able to estimate potential revenue losses to the misinvoicing of Egypt's imports and exports across all trading partners. GFI estimates that the value of the trade gap for misinvoiced goods equals US$8.5 billion, or 10.5 percent of the country's total trade of US$80.6 billion in 2016. Here are a few other notable findings: Of the total estimated lost potential revenue of US$1.6 billion, approximately US$404 million was due to export misinvoicing and approximately US$1.2 billion was due to import misinvoicing. The US$1.2 billion in import misinvoicing can be further broken down by uncollected VAT tax (US$410 million), uncollected customs duties (US$358 million), and uncollected corporate income tax (US$428 million). The US$404 million in export misinvoicing can be further broken down by uncollected corporate income tax (US$181 million) and uncollected tax from royalty payments (US$223 million).In 2016, some of the Egyptian imports most at risk for high values of import under-invoicing were essential oils, vehicles, machinery and meats. In 2016, some of the Egyptian imports most at risk for high values of import under-invoicing were from Ireland, China and Switzerland. Looking simultaneously at both high-risk commodities and high-risk trade partners in 2016, GFI found that under-invoiced imports of essential oils from Ireland, Switzerland and the Netherlands, as well as nearly half of all imports from China, were highlighted as potential high-level risks for revenue losses. While a great deal of attention has been placed on the issue of profit shifting and abusive transfer pricing by multinational corporations, GFI believes revenue losses from trade misinvoicing are likely equivalent to those attributed to tax evasion and profit shifting by multinational corporations. GFI urges Egypt to strengthen the penalty for trade misinvoicing under Article 122, as the penalties at present are insufficient to deter criminals. GFI also recommends Egypt consider using GFI's online tool GFTrade, designed to build the capacity of customs authorities to better detect misinvoicing as transactions are occurring and take corrective steps in real time. GFI further recommends Egypt set a date for beginning automatic exchange of tax information and that Egypt should consider signing on to support the Addis Tax Initiative (ATI), a group of 55 countries committed to enhancing the mobilization and effective use of domestic revenues and to improving the fairness, transparency, efficiency and effectiveness of their tax systems. Details: Washington, DC: Author, 2019. 40p. Source: Internet Resource: Accessed June 28, 2019 at; https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2019/06/Egypt-2019-1.pdf?time=1561665671 Year: 2019 Country: Egypt URL: https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2019/06/Egypt-2019-1.pdf?time=1561665671 Shelf Number: 156730 Keywords: Financial Crime Financial Fraud Money Laundering Tax Evasion Tax Revenue Trade Misinvoicing |
Author: Forstater, Maya Title: Illicit Flows and Trade Misinvoicing: Are We Looking Under the Wrong Lamppost? Summary: Introduction: Large estimates of trade misinvoicing have played a key role in shaping perceptions of the issue. The Washington based NGO Global Financial Integrity (GFI) uses mismatches in official trade data to estimate that trade misinvoicing drains US800 billion dollars from developing countries annually. Their work also inspired UNECA and the African Union to set up a High Level Panel on Illicit Financial Flows from Africa, which estimated US50 billion dollars of illicit flows from Africa. Based on these estimates, Thabo Mbeki as chair of the panel argued that "the bulk of illicit financial flows - 60% and more - derive from the activities of the large commercial companies", through trade misinvoicing, with criminal activities such as drug trafficking accounting for about 30%, and corruption less than 10%. Manipulation of import and export prices is certainly a real phenomenon. In China overpayments of imports have been used to get around the country's currency controls. In Venezuela scammers use inflated import invoices to buy cheap dollars from the official currency control agency. There have long been concerns that exporters shipping tropical hardwoods from Papua New Guinea may be underdeclaring their value. Networks involved in smuggling people, drugs and arms use Halawa agents to transfer money, and they may settle up between themselves through shipments of licit goods under-charged. However, it is not clear that the influential and widely quoted estimates of trade misinvoicing derived from mismatches in trade statistics help us to understand the reality of illicit economies and networks in practice. This briefing looks at some of the key problems with these estimates and argues that continuing to use them as such a bright point of light in shaping our understanding could impede, rather than support targeting of effective action in combatting corruption, organized crime, illegal exploitation of natural resources and tax evasion. Details: Bergen, Norway: Chr. Michelsen Institute, 2016. 8p. Source: Internet Resource: Accessed July 16, 2019 at: https://www.cmi.no/publications/5979-illicit-flows-and-trade-misinvoicing#pdf Year: 2016 Country: International URL: https://www.cmi.no/publications/5979-illicit-flows-and-trade-misinvoicing Shelf Number: 156809 Keywords: Corruption Drug Trafficking Environmental Crime Financial Crime Illegal Logging Illicit Economies Illicit Financial Flows Organized Crime Tax Evasion Trade Misinvoicing |
Author: Global Financial Integrity Title: Indonesia: Potential Revenue Losses Associated with Trade Misinvoicing Summary: This report analyzes Indonesia's bilateral trade statistics for 2016 (the most recent year for which sufficient data are available), as published by the United Nations (Comtrade). The detailed breakdown of bilateral Indonesian trade flows in Comtrade allowed for the computation of trade value gaps that are the basis for misinvoicing estimates. Import gaps represent the difference between the value of goods Indonesia reports having imported from its partner countries and the corresponding export reports by Indonesia's trade partners. Export gaps represent the difference in value between what Indonesia reports as having exported and what its partners report as imported. In addition to identifying the trade gaps in Indonesia's 2016 imports and exports with its partners, the report also estimated the potential loss of tax revenue associated with the gaps. The analysis shows that the estimated potential loss of revenue to the Indonesian government is approximately US$6.5 billion for 2016. To put this figure in context, this amount represents 6.0 percent of the value of Indonesia's total government revenue collections in 2016. Put still another way, the estimated value gap of all misinvoiced imports and exports was US$38.5 billion, which is equivalent to 13.7 percent of the country's total trade of US$280.2 billion in 2016. The total estimated potential lost revenue of US$6.5 billion is comprised of misinvoiced imports and exports. The portion of government revenue potentially lost due to import misinvoicing in 2016 was approximately US$2.6 billion. This amount can be further divided into its component parts: uncollected value-added tax (VAT) (US$1.2 billion), uncollected customs duties (US$302 million) and uncollected corporate income tax (US$1.1 billion). The potentially lost revenue due to misinvoiced exports in 2016 was approximately US$3.9 billion. This amount can be further divided into its component parts: uncollected corporate income tax (US$1.8 billion) and uncollected tax from royalty payments (US$2.1 billion) (See Table 2). 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 on the invoices. When import over-invoicing occurs (i.e. when companies pay more than would normally be expected for a product), corporate revenues are lower, making taxable income levels lower and consequently less income tax is paid. In cases of export under-invoicing, the exporting company collects less revenue than would be anticipated and therefore reports lower taxable income, subsequently paying less income tax. Total misinvoicing gaps related to imports in 2016 can be broken down by import under-invoicing (US$11.8 billion) and import over-invoicing (US$6.1 billion). These figures represent the estimated value of the gap between what was reported by Indonesia and its trading partners. The estimated loss in government revenue is a subset of these amounts and is based on VAT tax rates in 2016 (10.0 percent), customs duties in 2016 (calculated by WITS tariff data on line by line basis) and corporate income taxes on profit in 2016 (17.2 percent), which are then applied to the value gap. Export misinvoicing gaps were US$10.6 billion for export under-invoicing and US$10.0 billion for export over-invoicing. Lost corporate income taxes (17.2 percent) and royalties in 2016 (20.0 percent) are then applied to export under-invoicing amounts to calculate lost government revenue. The study also includes a more in-depth exploration of the approximately US$302 million in tax revenues from customs duties that Indonesia is estimated to have lost due to import under-invoicing in 2016 by examining imports according to major commodity groups as listed among the United Nations Harmonized System (HS) product codes at the two-digit level. We examined Indonesia's imports to identify particular products that appeared to be at especially high risk for trade misinvoicing in 2016 (See Figure 2). We also examined Indonesia's imports in 2016 to identify particular trading partners that appeared to be at high risk for trade misinvoicing both in terms of their percentage total imports to Indonesia, as well as in terms of their dollar values of estimated lost customs revenues. The partner countries associated with largest potential dollar values of losses included China (US$79.7 million), Japan (US$57.4 million) and Singapore (US$42.5). While under-invoiced imports from these three trading partners reflected relatively minor potential revenue losses as a percent of total imports from these countries, their combined potential revenue losses by dollar values totaled US$179.6 million. When looking at under-invoiced imports by both commodities and trading partners at the same time, Figure 4 shows that the revenue risks on under-invoiced imports of beverages (HS 22) from Singapore appears to have been particularly acute in 2016. Under-invoicing associated with imports of essential oils (HS 33) from Singapore, plastics (HS 39) from China and vehicles (HS 87) from Japan and China were also highlighted as a potential risk for revenue losses (See Figure 4). We conclude by listing a series of steps that Indonesia can take at the national and international level to address the problem of trade misinvoicing in particular and the problem of illicit financial flows (IFFs) more generally. At the national level, GFI recommends that Indonesia takes steps to streamline procedures and improve oversight, transparency and accountability mechanisms in its customs administration. This could include scaling up the resources needed to strengthen regulatory enforcement, invoice audits and reviews. GFI also recommends that Indonesia consider adopting its online tool - GFTrade - designed by GFI to build the capacity of customs authorities to better detect misinvoicing as transactions are occurring and take corrective steps in real time. In terms of tackling the problem of IFFs more broadly, GFI commends Indonesia for having adopted legislation that addresses beneficial ownership (requiring the true beneficial owners of companies be identified), which the Financial Action Task Force (FATF) views quite positively; for implementing country-by-country reporting (CBCR); for adopting automatic exchange of tax information (AEOI) with partner countries; and for signing on to support the Addis Tax Initiative. At the international level, GFI recommends that Indonesia use its diplomatic clout in the international arena to support a number of policy initiatives that require international cooperation to curtail IFFs. Of particular importance are international efforts to increase transparency in the global financial system, measures related to reducing the secrecy of tax havens and anonymous companies and efforts to curtail money laundering techniques. Specifically, GFI recommends that Indonesia and other world leaders take pro-active steps to support ongoing international efforts on these issues. Details: Washington, DC: Global Financial Integrity, 2019. 40p. Source: Internet Resource: Accessed July 19, 2019 at: https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2019/06/Indonesia-2019_6.21.19.pdf?time=1563553709 Year: 2019 Country: Indonesia URL: https://gfintegrity.org/report/indonesia-potential-revenue-losses-associated-with-trade-misinvoicing/ Shelf Number: 156728 Keywords: Customs Fraud Financial Crime Illicit Financial Flow Tax Evasion Tax Fraud Tax Haven Trade Misinvoicing |