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Demir, B and Javorcik, B (2020)

Trade Policy Changes, Tax Evasion and Benford’s Law

Journal of Development Economics, 144.

ISSN/ISBN: Not available at this time. DOI: 10.1016/j.jdeveco.2020.102456

Abstract: This paper draws attention to import duty evasion as a margin through which firms adjust to changes in trade policy. This margin is different from the other forms of adjustment, as it can be employed very fast and thus it may constitute the initial reaction to the shock before a slower adjustment through the other channels take place. The study also proposes a new method of detecting tax evasion in international trade, based on deviations from Benford’s law. It applies the method in the context of an unexpected policy change in Turkey that increased the cost of import financing. The results are consistent with an immediate increase in tax evasion in the affected import flows, which dies down a year later. A standard ap- proach to detecting tariff evasion, based on “missing trade”, confirms these conclusions.

@article{, title = {Trade policy changes, tax evasion and Benford's law}, journal = {Journal of Development Economics}, volume = {144}, pages = {102456}, year = {2020}, issn = {0304-3878}, doi = {10.1016/j.jdeveco.2020.102456}, url = {}, author = {Banu Demir and Beata Javorcik}, keywords = {Tax evasion, Trade financing, Border taxes, Benford's law}, }

Reference Type: Journal Article

Subject Area(s): Accounting, Economics