Policies, Enforcement, and Customs Evasion: Evidence from India
IMF Working Papers, March 1, 2007
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Bibliographic details
- Authors: Prachi Mishra, Arvind Subramanian, Petia Topalova
- Published: March 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451866247.001
Research question and approach
- Examines the effect of tariff policies on evasion of customs duties in the context of the trade reform in India of the 1990s.
- Exploits variation in tariff rates across time and products to identify the evasion elasticity (the effect of tariffs on evasion).
- Relates the evasion elasticity to factors tied to customs enforcement and the quality of customs institutions.
Core findings
- Finds a positive and robust effect of tariffs on import tax evasion.
- The evasion elasticity is influenced by product characteristics that determine how easy it is to detect evasion:
- More differentiated products exhibit a higher evasion elasticity.
- The evasion elasticity, broadly interpreted as reflecting the quality of customs administration, has not improved over the 1990s.
- Results suggest that the effectiveness of customs in addressing evasion may be better in India than China, although China appears to be catching up over time.
Implications for enforcement and policy
- Tariff levels materially affect incentives for customs duty evasion; enforcement effectiveness interacts with tariff policy outcomes.
- Product-level characteristics matter for detectability and should inform targeting of customs controls and valuation/classification checks.
- Persistent evasion elasticity over the 1990s indicates limited improvement in customs administration quality during that decade, implying scope for reforms aimed at institutional capacity and detection technologies.
- Cross-country comparison points to potential lessons from China's evolving enforcement effectiveness as it catches up.
Publication and metadata
- Authors: Prachi Mishra, Arvind Subramanian, Petia Topalova
- Date: March 1, 2007
- Series: IMF Working Papers, Working Paper No. 2007/060
- Issue: 060
- Volume: 2007
- Pages: 39
- DOI: https://doi.org/10.5089/9781451866247.001
- ISBN: 9781451866247
- ISSN: 1018-5941
- Subject: Customs procedures, Exports, Imports, Tariffs, Valuation, origin and classification
- Keywords: country X product, customs administration, customs duty, customs official, tariff policy, WP
Source: "Policies, Enforcement, and Customs Evasion: Evidence from India", Prachi Mishra, Arvind Subramanian, Petia Topalova, IMF Working Papers (2007), Working Paper No. 2007/060.