## 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

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### 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.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/policies-enforcement-and-customs-evasion-evidence-from-india-20471_