Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade
IMF Working Papers, May 1, 2005
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Bibliographic details
- Published: May 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861211.001
Summary and Research Question
- Traditional explanations for indirect trade via an entrepôt focus on savings in transport costs and on the role of specialized agents in processing and distribution.
- This paper provides an alternative perspective: entrepôts may facilitate tariff evasion.
- Empirical focus: comparison of direct exports to mainland China and indirect exports to mainland China via Hong Kong SAR.
Key Findings
- The indirect export rate rises with the Chinese tariff rate.
- This relationship holds despite there being no legal tax advantage to sending goods via Hong Kong SAR.
- Authors conduct a number of extensions to rule out plausible alternative hypotheses.
Data and Scope
- Empirical comparison uses data on:
- Direct exports to mainland China.
- Indirect exports to mainland China via Hong Kong SAR.
- Publication Details:
- Pages: 18
- Volume: 2005
- Issue: 102
- Series: Working Paper No. 2005/102
- DOI: https://doi.org/10.5089/9781451861211.001
- Stock No: WPIEA2005102
- ISBN: 9781451861211
- ISSN: 1018-5941
- Publication date on landing page: May 1, 2005
Subjects and Keywords
- Subject: Demand elasticity, Exports, Imports, Tariffs, Tax evasion
- Keywords: tariff rate, WP
Implications and Extensions
- Policy-relevant implication: higher tariff rates are associated with greater use of indirect routes (entrepôts), suggesting a channel for tariff evasion.
- Robustness: the paper undertakes multiple extensions to exclude alternative explanations for the observed pattern.
Source: Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade, IMF Working Papers, Working Paper No. 2005/102 (May 1, 2005).