Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244430 
Year of Publication: 
2007
Series/Report no.: 
Working Paper No. 8/2007
Publisher: 
Örebro University School of Business, Örebro
Abstract: 
In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in both Kenya and Tanzania. According to the Transparency International Corruption Perceptions Index, Kenya is more corrupt than Tanzania, but we find that the coefficient on tax is higher in Tanzania compared to Kenya implying that tax evasion on imported goods is higher in Tanzania compared to the Kenya. We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya-United Kingdom case compared to the Tanzanian-United Kingdom case which supports our previous finding that tax evasion is more severe in the Tanzanian customs authority.
Subjects: 
Tax evasion
corruption
trade
Kenya
Tanzania
JEL: 
F14
H26
Document Type: 
Working Paper

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