Determinants and pervasiveness of the evasion of custom duties

Evasion of custom duties is a serious concern in developing countries, where tariff receipts are often important while their collection is problematic. We study theoretically and empirically the determinants of evasion across countries and products, based on a systematic analysis of discrepancies in trade declarations when they are available for both partners. We conclude that evasion of custom duties is larger in poorer countries, especially when the rule of law is limited. The consequences are likely to be serious in the poorest countries, where a one percentage point higher tariff is found to be associated on average with imports understatement by one percent or more. We also assess policy remedies and conclude in particular that automated custom data treatment may be useful. # The authors acknowledge financial support by the AgFoodTrade project, funded by the European Commission (Grant Agreement no. 212036).