Implied Tax Revenue Loss From Trade Mispricing."




Dear india,

We are pleased to present our report, "Implied Tax Revenue Loss From Trade Mispricing."
This work analyzes tax revenue lost due to one form of trade mispricing, that which arises when transactions are reinvoiced. This occurs when goods leave a country of export under one invoice, then the invoice is redirected to another jurisdiction such as a tax haven where the price is altered, and then the revised invoice is sent to the importing country for clearing and payment purposes. Data on this form of mispricing is obtained from International Monetary Fund Direction of Trade Statistics, which reports annual exports and imports for all pairs of reporting countries.

We do not in this study analyze trade mispricing that occurs within the same invoice, and we do not cover trade in services and intangibles, which are not addressed in IMF Direction of Trade Statistics. Each of these phenomenon likewise move considerable sums of tax evading money across borders.

Focusing only on reinvoicing, our estimate is that developing countries lose approximately US$100 billion a year from this form of trade mispricing alone. Our study well supports the work of Christian Aid, which estimates tax losses for developing countries due to all forms of trade mispricing to be US$160 billion a year.

Trade mispricing moves more illicit money across borders than any other single phenomenon. The tax revenues lost for developing countries through this mechanism are roughly comparable to the amount of Official Development Assistance going into developing countries. Curtailing this tax loss will therefore greatly contribute to revenues available for poverty alleviation and sustainable growth in poorer countries. To curtail such tax losses, developing and developed countries alike must work to curb the global shadow financial system that facilitates illicit financial flows.

As part of our work in this area, GFI recently launched the G20 Transparency Campaign-an initiative to empower citizens around the world to make their voices heard when the G20 meets in Canada this June. There is a crucial need for greater transparency and accountability in the global financial system, and by signing the petition you will lend your voice to a growing call for change.

Click here to download a full copy of the report; to learn more about GFI's G20 Transparency Campaign visit the Web site at www.G20Transparency.com.

Raymond W. Baker

Director

Global Financial Integrity





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