How Misinvoicing Leads to Massive Revenue Losses.
WASHINGTON, DC – Analysis of trade misinvoicing in South Africa from 2010 – 2014 shows that the potential average loss of revenue to the government was approximately $7.4 billion per year or $37 billion during the period studied, according to a new study by Global Financial Integrity. The report, titled South Africa: Potential Revenue Losses Associated with Trade Misinvoicing, analyzes South Africa’s bilateral trade statistics for five year period 2010 – 2014 using information from United Nations Comtrade and data made available from the South African Revenue Authority.
The detailed breakdown of bilateral South African trade flows allowed for the computation of trade value gaps that are the basis for trade misinvoicing estimates. Import gaps represent the difference between the value of goods South Africa reports having imported from its partner countries and the corresponding export reports by South Africa’s trade partners. Export gaps represent the difference in value between what South Africa reports as having exported and what its partners report as imported.
The average annual revenue lost due to the misinvoicing of imports was $4.8 billion. This amount can be further divided into its component parts: uncollected VAT tax ($2.1 billion), customs duties ($596 million), and corporate income tax ($2.1 billion). Lost revenue due to misinvoiced exports was $2.6 billion on average each year which is related to lower than expected corporate income taxes.