Tax Evasion And Avoidance In International Trade And Trade Discrepancy Between Ethiopia China An Empirical Evidence For Ethiopia

We believe that the discrepancies in international trade data are more than simply an inconvenience for empiricalrnresearchers. Tax evasion, by its nature, is difficult to observe. They may, in fact, reveal a significant amount ofrninformation about the incentives of exporters and importers who are confronted with taxes, tariffs, and capitalrncontrols, and have incentives to evade them. Quantitative Research Methodology and ratio analysis (model used byrnAs in Fisman and Wei (2004) ) is used. The study uses cross-sectional data analysis for three period from 2014-rn2016. Secondary data were collected, coded and entered into EViews ® 8 Estimation Forecasting · StatisticalrnAnalysis Graphics Data Management Simulation for regression analysis. The main objectives of the study is tornidentify statically significant & economically important co-relation of the observed report discrepancy betweenrnimported and exported goods traded between two countries in quantity and value, which may be leads to taxrnevasion & avoidance. There are a number of incentives for firms to misstate the invoice price of an export-importrntransaction, such as tax avoidance, tariff evasion, transfer pricing, and avoidance of capital controls. Thernresearcher also used to investigate whether tax rate and exchange rate devaluation is impact on import exportrntrade discrepancy and tax revenue(evasion). Since the late 2014-2016s, reported Ethiopia imports from China andrnchina exported to Ethiopia have show report regularly increasingly in differently. This discrepancy, which is variesrnby product categories, the regression analysis shows tax rate and exchange rate have appositive relationship andrnpositive coefficients with trade weighted gap shown that as tax rate and exchange rate increases trade weightedrngap also increases. The study found that 'tax evasion ' is highly correlated with tax rates & exchange rate: muchrnmore value is 'lost' for products with higher tax rates. any increase in tax rate is likely to produce a reduction ratherrnthan an increase in tax revenue. The study also uses ratio analysis of import data of goods reported by Ethiopiarnand export of goods reported by china to identify whether there is trade waited gap & tax evasion between the tworncountries. If there is no trade waited gap & tax evasion the ratio of import of goods report by Ethiopia to export ofrngoods report by china is one. If the ratio of import of goods report by Ethiopia to export of goods report by chinarngreater than or less than one there is trade waited gap & tax evasion or capital flight in and out of the country. Allrnratio analysis shows results are less than one. So, the study found that strong statistical evidence of trade waitedrngap & capital flight from the Ethiopia. By reviewing the existing literature result & Using a model that allows forrnsimultaneous checks for china with other countries indicate that, the study found strong statistical evidence ofrnunder-reporting exports at Chinese border to avoid paying value-added tax (VAT) and tax rebate and capital flight.rnDuring this study Reviewed from different research under taken shows the chine’s tax policy of export tradernrebate & vat refund under reporting of export at chine’s. Due to this reason chine’s exporter also under reportrnexport report for the purpose of capital flight control from export country to the chine’s . The study also revealedrnthat from the ERCA import data & tax collected provide evidence of tariff evasion at the Ethiopia border chine’srnproduct and USA & Europe products imported as Djibouti imported but there is no the reality of trade data reportrnbetween Ethiopia’s and Djibouti reported to the world trade.com (WITTS) data base since 2009. These thingsrndone in order to reduce the CIF value of imported goods, because the reality of Ethiopians tax rate & tariff isrnincreasing as CIF value of imported goods increase . Another Reason for trade discrepancy is the recording errorrnor misreport to world trade.com in the Ethiopian side. For example there is import report fuels from china tornEthiopia but the reality is china is not fuels exporter country and there is no report from china export of fuels tornEthiopia. The study provide indirect evidence of tariff evasion at the Ethiopia border or Djibouti border, andrnindirect evidence of evasion of capital controls (money laundering). The main conclusions drawn from this study arernexchange rate & tax rate have significant & insignificant impact on tax collection which leads to tax evasion &rnavoidance. As tax rate & exchange rate increases trade waited gap between two countries increases. All importedrngoods report from china to Ethiopia & china export of goods to Ethiopia are significant gap from year to year. Thernmain reason for trade waited gap & tax evasion and avoidance in Ethiopia are High Tax rate on imported goods ,rnforeign currency exchange rate devaluation and shortage of LC in Ethiopia , chine’s tax policy of export tradernrebate & vat refund, under reporting of export at chine’s boarder for the purpose of capital flight control &rnmisleading report of imported goods data & recording error in related applicable entities in Ethiopia.rnRecommendations that the policy makers come with policies to control the import and export of goods traded between tworncountries to tighten trade waited gap. The government responsible for tax collection in Ethiopia should come up with taxrncontrolling systems to ensure a fixed exchange rate to prevent depreciation of the domestic currency against other tradingrncurrencies. Policy makers come with review the high tax rate on import of goods traded from abroad in order to reduce taxrnevasion and avoidance. The government should be control and cross check the flow of data recorded & reported between thernresponsible entities to control, real amount of trade data & Tax evasion & avoidance in Ethiopian.

Get Full Work

Report copyright infringement or plagiarism