Trade Misinvoicing: What can we Measure?
Publication dateJul, 2017
DetailsNIPFP Working Paper No. 200
AuthorsSuranjali Tandon and R. Kavita Rao
The existing studies on trade misinvoicing have focussed on the discrepancy in reported trade statistics between developing and developed countries. The estimates based on such methods rely on the assumption that developed countries report their trade statistics correctly. In this paper, we provide evidence that trade misinvoicing between developed countries is in fact large and any estimate based on such method may not provide an accurate representation of the dimensions of trade misinvoicing in the world. Further, there is need to develop a methodology by which one can attribute the misinvoicing to one or the other trade partner. To address this problem, we offer an alternative methodology. Since the exports of a country are necessarily imports of another country we use domestic factors to predict the export and import misinvoicing for a sample of large misinvoicers for the period 1990 to 2014. Such estimates allow us to establish whether the discrepancy can be attributed to the export or the import side for all countries. We find that the domestic factors better explain the export side, therefore, allowing us to estimate illicit flows through trade misinvocing using the export misinvoicing by all countries.