Publication: Tax Evasion through Trade Intermediation: Evidence from Chinese Exporters
Date
2015-04
ISSN
Published
2015-04
Author(s)
Liu, Xuepeng
Shi, Huimin
Ferrantino, Michael
Abstract
Many production firms use intermediary
trading firms to export indirectly. This paper uses Chinese
export data at the transaction level to investigate the tax
evasion motive through indirect trade. The paper provides
strong evidence that, under Chinas partial export
value-added tax rebate policy, production firms can
effectively evade value-added taxes by underreporting their
selling prices to domestic intermediary trading firms,
especially when they sell differentiated products. Even for
a moderate level of underreporting, the revenue loss is
close to one billion U.S. dollars. The paper also finds that
such underreporting behavior through domestic intermediaries
may be associated with cross-border evasion through
underreporting export values to foreign partners. In
addition, the results indicate that the evasion motive is
stronger for larger transactions.
Citation
“Liu, Xuepeng; Shi, Huimin; Ferrantino, Michael. 2015. Tax Evasion through Trade Intermediation : Evidence from Chinese Exporters. Policy Research Working Paper;No. 7232. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/21846 License: CC BY 3.0 IGO.”
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