An estimated $1.6 trillion in potential trade misinvoicing among 134 developing countries, including Bangladesh, and all of their global trading partners took place in 2018, according to a report.
Trade-related illicit financial flows between developing countries and 36 advanced economies stood at $835 billion during this time.
Washington-based think tank Global Financial Integrity (GFI) report “Trade-Related Illicit Financial Flows in 134 Developing Countries 2009-2018,” published Thursday, shows trade misinvoicing is a persistent problem across developing nations, resulting in potentially massive revenue losses and facilitating illicit financial flows across international borders.
The developing countries with the largest value gaps identified in trade with 36 advanced economies in 2018 are China ($305.0 billion), Poland ($62.3 billion), India ($38.9 billion), Russia ($32.6 billion) and Malaysia ($30.7 billion).
The developing countries with the largest value gaps identified in trade with 36 advanced economies in 2018 as a per cent of total trade are The Gambia (45.0 per cent), Malawi (36.6 per cent), Suriname (31.9 per cent), Kyrgyzstan (30.6 per cent) and Belize (29.2 per cent).
“During a time when developing countries are scrambling for every penny to fund vaccines and medicines to fight Covid-19 infections, billions of dollars in duties and taxes are going uncollected. It is shocking how few governments are paying any attention to these massive losses,” GFI President and CEO Tom Cardamone said.
Trade misinvoicing occurs when importers and exporters deliberately falsify the declared value of goods on invoices submitted to customs authorities. This allows traders to illegally move money across international borders, evade tax and/or customs duties, launder the proceeds of criminal activity, circumvent currency controls, and hide profits in offshore bank accounts.
Value gaps, or mismatches in international trade transactions, indicate that developing countries are not collecting the correct amount of trade-related taxes and duties that are owed, leading to potentially massive amounts of revenue losses. While these value gaps are only estimates of misinvoicing, they indicate the scale of the problem.
To identify potential trade misinvoicing, GFI examined official trade data reported to the United Nations to identify value gaps, or mismatches, in the data regarding what any two countries reported about their trade with one another.
While there are reasons for some mismatches to regularly show up in the international trade data, the majority of the gaps identified are indicative of trade misinvoicing activity, GFI said.
The think-tank looked at all bilateral trade data for 134 developing countries, as well as trade between those countries and 36 advanced economies.
At the national level, countries should make trade misinvoicing illegal, strengthen law enforcement capacities of customs authorities; establish multi-agency teams to address customs fraud, tax evasion and other financial crimes; implement readily available trade misinvoicing risk assessment tools, strengthen customs oversight of free trade zones, establish national trade facilitation committees, GFI said.
Internationally countries should work together to expand information-sharing between importing and exporting countries, explore the use of distributed ledger technology to identify trade misinvoicing, it added.
Source: United News of Bangladesh