Tax Evasion through Trade Intermediation : Evidence from Chinese Exporters / Liu, Xuepeng

Format:

Book

Government document

Author/Creator:

Liu, Xuepeng

Contributor:

Ferrantino, Michael

Liu, Xuepeng

Shi, Huimin

Series:

Policy research working papers.

World Bank e-Library.

Language:

English

Subjects (All):

China's Export Tax Rebates.

Debt Markets.

Economic Theory & Research.

Emerging Markets.

Markets & Market Access.

Tax Evasion.

Trade Intermediation.

Trade Policy.

Value Added Tax.

Local Subjects:

China's Export Tax Rebates.

Debt Markets.

Economic Theory & Research.

Emerging Markets.

Markets & Market Access.

Tax Evasion.

Trade Intermediation.

Trade Policy.

Value Added Tax.

Physical Description:

1 online resource (45 pages)

Other Title:

Tax Evasion through Trade Intermediation

Place of Publication:

Washington, D.C., The World Bank, 2015

System Details:

data file

Summary:

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 China's 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.