$1.6tn in potential trade misinvoicing found in 134 developing countries in 2018: GFI

An estimated $1.6 trillion in potential trade misinvoicing among 134 developing countries, including Bangladesh, and all of their global trading partners took place in 2018, according to a report.

Trade-related illicit financial flows between developing countries and 36 advanced economies stood at $835 billion during this time.

Washington-based think tank Global Financial Integrity (GFI) report “Trade-Related Illicit Financial Flows in 134 Developing Countries 2009-2018,” published Thursday, shows trade misinvoicing is a persistent problem across developing nations, resulting in potentially massive revenue losses and facilitating illicit financial flows across international borders.

The developing countries with the largest value gaps identified in trade with 36 advanced economies in 2018 are China ($305.0 billion), Poland ($62.3 billion), India ($38.9 billion), Russia ($32.6 billion) and Malaysia ($30.7 billion).

The developing countries with the largest value gaps identified in trade with 36 advanced economies in 2018 as a per cent of total trade are The Gambia (45.0 per cent), Malawi (36.6 per cent), Suriname (31.9 per cent), Kyrgyzstan (30.6 per cent) and Belize (29.2 per cent).

“During a time when developing countries are scrambling for every penny to fund vaccines and medicines to fight Covid-19 infections, billions of dollars in duties and taxes are going uncollected. It is shocking how few governments are paying any attention to these massive losses,” GFI President and CEO Tom Cardamone said.

Trade misinvoicing occurs when importers and exporters deliberately falsify the declared value of goods on invoices submitted to customs authorities. This allows traders to illegally move money across international borders, evade tax and/or customs duties, launder the proceeds of criminal activity, circumvent currency controls, and hide profits in offshore bank accounts.

Value gaps, or mismatches in international trade transactions, indicate that developing countries are not collecting the correct amount of trade-related taxes and duties that are owed, leading to potentially massive amounts of revenue losses. While these value gaps are only estimates of misinvoicing, they indicate the scale of the problem.