Investigating and Estimating the Relation between Import tariff Rate and Smuggling in Iran

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Larijani, Saeed | 2017

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 49520 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Vesal, Mohammad; Memarnezhad, Abbas
Abstract:
Governments use tariff and non-tariff import barriers for several reasons including protecting national industries, tax income and or checking the quality of imported products. These barriers motivate importers to make a profit through smuggling. This study focuses on “import tariff rate” as a main motivation for smuggling and tries to estimate the elasticity of smuggling with respect to tariff rates. Iran trade flow data and tariff rates are collected from Trademap, WITS, Iran’s customs administration and Iran’s Trade Development Organization. By observing reported exports to Iran from main trade partners together with reported imports to Iran we construct a proxy for the amount of smuggling at HS6 dissaggregated products. We use both simple regression using 2014 data and fixed effects estimation using 2011 and 2014 for 10 main trade partners. Results show that there is a positive correlation between tariff rates and smuggling. Specifically, a one percentage point increase in tariff rate increases the trade gap by about 4.7 percents. The results are highly significant and robust to adding controls and restricting the sample
Keywords:
Tax Evasion ; Import Tariffs ; Trade Wedge ; Smuggling ; Import Underinvoicing

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