ISLAMIC REPUBLIC OF IRAN: Estimations on Smuggling of Goods

Source details

Estimations aim to include the Non Observed Economy (NOE) in National Accounts by applying the Flow Commodity Approach for the Supply and Use of goods and services (official, non-official, and smuggling).
A major part of informal activities has been covered by establishing the balance between Demand and Supply Aggregates.
An estimation of smuggling and informal statistics in import and export exists in External Balance of Payments (BOP) and is applied to National Accounts Statistics.
Household surveys (Urban and Rural Households income and expenditure) now collect expenditures in informal sectors such as Hotel and Restaurants, camp residency expenses, and professional services payments and apply them to National Accounts Statistics.
Due to lack of sufficient data and fundamental statistics for the Non Observed (hidden) Economy, an accurate figure is not accessible; precise estimation requires additional surveys for households and small establishments.
Transition plans: changing from 1993 SNA to 2008 SNA and rebasing to 2016(1395) are expected to improve NOE estimation.

The value and volume of contraband smuggled into and out of the country are estimated by "Iran Headquarters for Combating the Smuggling of Commodities and Foreign Exchange", the body responsible for tackling commodity smuggling.
Documents submitted by the Headquarters form the basis of the presented information.
Data on smuggled imports and exports are included under the "goods account" entry in the Balance of Payments (BOP) table as an adjustment on external sector data.
As "current account" entries on the BOP table are compatible with "global current account" entries on national accounts, smuggled goods data in the BOP goods account are reflected in national accounts data.
When estimating GDE using the expenditure approach, the amount of smuggled import is subtracted under the total value of imports because the smuggled value of imports is included under each component of GDE.

Illegal imports list:
- 16 items comprising authorized goods and authorized conditional goods.
- 3 prohibited (banned) items.
Examples of goods with high attractiveness to smugglers for illegal importing: tea, rice, sugar, vegetable oil, chocolate, textile and apparel, footwear, home appliances.
Authorized conditional goods mainly consist of cosmetics and hygienic products, cigarettes, toys.
Prohibited items include narcotics and liquors.
Illegal export items with high appeal are mostly subsidized goods such as fuels, pharmaceuticals, and detergents.

Estimation and valuation methods include:
- Gap analysis of export and import of earmarked items based on total supply and use of goods.
- Gap in traded goods statistics using importing and country of origin database (DOTS).
- Application of econometric models.
Given limited access and data restrictions, the conventional and most applicable methods are:
- Gap analysis between the value of supply and use for authorized goods.
- Discovery rate approach for banned products.
Estimation procedure for authorized and authorized conditional items:
- Total supply = total domestic production + official imports.
- Domestic production data are derived from manufacturing industry surveys conducted and published annually by the CBI and SCI.
- Official imports data are collected from the Customs office.
- Use and consumption data are compiled from SCI's statistical surveys on household consumption and expenditure.
- Smuggled value estimate = difference between total supply and total use (domestic consumption and exports) for specified items.
For items whose production is prohibited:
- Smuggling estimate is based on the percentage of smuggled goods discovery rate.
Estimation of smuggled goods out of country (export smuggling) follows the same gap approach as for import smuggling for authorized and authorized conditional items (gap between total use and total supply).

The primary challenge is inaccessibility of accurate and up-to-date data on production, consumption, and inventory levels of authorized and authorized conditional goods.
For narcotics and alcoholic beverages, additional difficulty arises because production, distribution, and consumption are banned; estimates for these items are mostly based on smuggled goods discovery rate and are therefore subject to bias and errors.
The Headquarters' designation: Based on Paragraph 2 of the Headquarters' Approval released through its 122nd Meeting, Appendix to Letter No. 97-12294 dated January 15, 2019 registered under No. 97/383199 in the Classified Correspondence Division of Security Department on January 17, 2019, Iran Headquarters for Combating the Smuggling of Commodities and Foreign Exchange is the body responsible for data collection and disclosure on smuggled goods.