Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

May 1, 2005

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Format: Chicago

Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade, (USA: International Monetary Fund, 2005) accessed December 27, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Traditional explanations for indirect trade carried out through an entrepôt have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepôts may facilitate tariff evasion. Using data on direct exports to mainland China and indirect exports to it via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, even though there is no legal tax advantage to sending goods via Hong Kong SAR. We undertake a number of extensions to rule out plausible alternative hypotheses.

Subject: Demand elasticity, Exports, Imports, Tariffs, Tax evasion

Keywords: Tariff rate, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/102
Stock No:

WPIEA2005102
ISBN:

9781451861211
ISSN:

1018-5941

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