Political Connections and Tariff Evasion: Evidence from Tunisia [book]

Bob Rijkers, Leila Baghdadi, Gael Raballand
2015 Policy Research Working Papers   unpublished
Are politically connected firms more likely to evade taxes? This paper presents evidence suggesting firms owned by President Ben Ali and his family were more prone to evade import tariffs. During Ben Ali's reign, evasion gaps, defined as the difference between the value of exports to Tunisia reported by partner countries and the value of imports reported at Tunisian customs, were correlated with the import share of connected firms. This association was especially strong for goods subject to
more » ... oods subject to high tariffs, and driven by underreporting of unit prices, which diminished after the revolution. Consistent with these product-level patterns, unit prices reported by connected firms were lower than those reported by other firms and declined faster with tariffs than those of other firms. Moreover, privatization to the Ben Ali family was associated with a reduction in reported unit prices, whereas privatization per se was not. JEL classification: D73, F13, H26 Are politically connected entrepreneurs more likely to evade tariffs? At issue are not only inequity and fiscal losses but also inefficiency since tariff evasion endows perpetrators with a cost advantage over those who are compliant that is not based on performance. The question is especially relevant for developing countries, as they tend to be disproportionately reliant on revenues collected by customs to finance Bob Rijkers (corresponding
doi:10.1596/1813-9450-7336 fatcat:aoxrevowa5g3zobwgfluv2mneq