Tax Evasion and Avoidance in International Trade and Trade Discrepancy between Ethiopia & China an Empirical Evidence for Ethiopia
| dc.contributor.advisor | Alem, Hagos (PHD) | |
| dc.contributor.author | Ahmed, Kedir | |
| dc.date.accessioned | 2020-02-26T14:05:54Z | |
| dc.date.accessioned | 2023-11-04T07:57:37Z | |
| dc.date.available | 2020-02-26T14:05:54Z | |
| dc.date.available | 2023-11-04T07:57:37Z | |
| dc.date.issued | 2019-12 | |
| dc.description | A research paper submitted to the post Graduate office For partial fulfillment of the requirement of Accounting and Auditing | en_US |
| dc.description.abstract | We believe that the discrepancies in international trade data are more than simply an inconvenience for empirical researchers. Tax evasion, by its nature, is difficult to observe. They may, in fact, reveal a significant amount of information about the incentives of exporters and importers who are confronted with taxes, tariffs, and capital controls, and have incentives to evade them. Quantitative Research Methodology and ratio analysis (model used by As in Fisman and Wei (2004) ) is used. The study uses cross-sectional data analysis for three period from 2014- 2016. Secondary data were collected, coded and entered into EViews ® 8 Estimation Forecasting · Statistical Analysis Graphics Data Management Simulation for regression analysis. The main objectives of the study is to identify statically significant & economically important co-relation of the observed report discrepancy between imported and exported goods traded between two countries in quantity and value, which may be leads to tax evasion & avoidance. There are a number of incentives for firms to misstate the invoice price of an export-import transaction, such as tax avoidance, tariff evasion, transfer pricing, and avoidance of capital controls. The researcher also used to investigate whether tax rate and exchange rate devaluation is impact on import export trade discrepancy and tax revenue(evasion). Since the late 2014-2016s, reported Ethiopia imports from China and china exported to Ethiopia have show report regularly increasingly in differently. This discrepancy, which is varies by product categories, the regression analysis shows tax rate and exchange rate have appositive relationship and positive coefficients with trade weighted gap shown that as tax rate and exchange rate increases trade weighted gap also increases. The study found that 'tax evasion ' is highly correlated with tax rates & exchange rate: much more value is 'lost' for products with higher tax rates. any increase in tax rate is likely to produce a reduction rather than an increase in tax revenue. The study also uses ratio analysis of import data of goods reported by Ethiopia and export of goods reported by china to identify whether there is trade waited gap & tax evasion between the two countries. If there is no trade waited gap & tax evasion the ratio of import of goods report by Ethiopia to export of goods report by china is one. If the ratio of import of goods report by Ethiopia to export of goods report by china greater than or less than one there is trade waited gap & tax evasion or capital flight in and out of the country. All ratio analysis shows results are less than one. So, the study found that strong statistical evidence of trade waited gap & capital flight from the Ethiopia. By reviewing the existing literature result & Using a model that allows for simultaneous checks for china with other countries indicate that, the study found strong statistical evidence of under-reporting exports at Chinese border to avoid paying value-added tax (VAT) and tax rebate and capital flight. During this study Reviewed from different research under taken shows the chine’s tax policy of export trade rebate & vat refund under reporting of export at chine’s. Due to this reason chine’s exporter also under report export report for the purpose of capital flight control from export country to the chine’s . The study also revealed that from the ERCA import data & tax collected provide evidence of tariff evasion at the Ethiopia border chine’s product and USA & Europe products imported as Djibouti imported but there is no the reality of trade data report between Ethiopia’s and Djibouti reported to the world trade.com (WITTS) data base since 2009. These things done in order to reduce the CIF value of imported goods, because the reality of Ethiopians tax rate & tariff is increasing as CIF value of imported goods increase . Another Reason for trade discrepancy is the recording error or misreport to world trade.com in the Ethiopian side. For example there is import report fuels from china to Ethiopia but the reality is china is not fuels exporter country and there is no report from china export of fuels to Ethiopia. The study provide indirect evidence of tariff evasion at the Ethiopia border or Djibouti border, and indirect evidence of evasion of capital controls (money laundering). The main conclusions drawn from this study are exchange rate & tax rate have significant & insignificant impact on tax collection which leads to tax evasion & avoidance. As tax rate & exchange rate increases trade waited gap between two countries increases. All imported goods report from china to Ethiopia & china export of goods to Ethiopia are significant gap from year to year. The main reason for trade waited gap & tax evasion and avoidance in Ethiopia are High Tax rate on imported goods , foreign currency exchange rate devaluation and shortage of LC in Ethiopia , chine’s tax policy of export trade rebate & vat refund, under reporting of export at chine’s boarder for the purpose of capital flight control & misleading report of imported goods data & recording error in related applicable entities in Ethiopia. Recommendations that the policy makers come with policies to control the import and export of goods traded between two countries to tighten trade waited gap. The government responsible for tax collection in Ethiopia should come up with tax controlling systems to ensure a fixed exchange rate to prevent depreciation of the domestic currency against other trading currencies. Policy makers come with review the high tax rate on import of goods traded from abroad in order to reduce tax evasion and avoidance. The government should be control and cross check the flow of data recorded & reported between the responsible entities to control, real amount of trade data & Tax evasion & avoidance in Ethiopian. | en_US |
| dc.identifier.uri | http://etd.aau.edu.et/handle/123456789/20753 | |
| dc.language.iso | en | en_US |
| dc.publisher | A.A.U. | en_US |
| dc.subject | Exchange rate | en_US |
| dc.subject | Tax evasion & tax avoidance | en_US |
| dc.subject | Trade waited gap | en_US |
| dc.title | Tax Evasion and Avoidance in International Trade and Trade Discrepancy between Ethiopia & China an Empirical Evidence for Ethiopia | en_US |
| dc.type | Thesis | en_US |