Does Better Information Curb Customs Fraud?

68 Pages Posted: 23 May 2020 Last revised: 27 May 2020

See all articles by Cyril Romain Chalendard

Cyril Romain Chalendard

Université d'Auvergne - Clermont 1 - Centre d'Etudes et de Recherches sur le Developpement International (CERDI)

Alice Duhaut

World Bank

Ana M. Fernandes

World Bank - International Trade Division; World Bank

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Gael J. R. F. Raballand

affiliation not provided to SSRN

Bob Rijkers

World Bank

Date Written: May 21, 2020

Abstract

This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of high-risk import declarations increases fraud findings by 21.7 percentage points and tax collection by 5.2 percentage points. Second, a randomized control trial is conducted in which a subset of high-risk declarations is selected to receive detailed risk comments and another subset is explicitly tagged for ex-post monitoring. For declarations not subject to third-party valuation advice, detailed comments increase reporting of fraud by 3.1 percentage points and improve tax yield by 1 percentage point. However, valuation advice and detailed comments have a significantly smaller impact on revenue when potential tax losses and opportunities for graft are large. Monitoring induces inspectors to scan more shipments but does not result in the detection of more fraud or the collection of additional revenue. Better information thus helps curb customs fraud, but its effectiveness appears compromised by corruption.

Keywords: International Trade and Trade Rules, Tax Law, Ports & Waterways, Democratic Government, De Facto Governments, Administrative & Civil Service Reform, Public Sector Administrative & Civil Service Reform, Public Sector Administrative and Civil Service Reform, Health Service Management and Delivery

Suggested Citation

Chalendard, Cyril Romain and Duhaut, Alice and Fernandes, Ana Margarida and Mattoo, Aaditya and Raballand, Gael J. R. F. and Rijkers, Bob, Does Better Information Curb Customs Fraud? (May 21, 2020). World Bank Policy Research Working Paper No. 9254, Available at SSRN: https://ssrn.com/abstract=3607599

Cyril Romain Chalendard (Contact Author)

Université d'Auvergne - Clermont 1 - Centre d'Etudes et de Recherches sur le Developpement International (CERDI) ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

Alice Duhaut

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Ana Margarida Fernandes

World Bank - International Trade Division

1818 H Street, N.W.
Washington, DC 20433
United States

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/afernandes

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

Gael J. R. F. Raballand

affiliation not provided to SSRN

No Address Available

Bob Rijkers

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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