Hostname: page-component-7d8f8d645b-h5t26 Total loading time: 0 Render date: 2023-05-28T01:22:53.628Z Has data issue: false Feature Flags: { "useRatesEcommerce": true } hasContentIssue false

Export Fraud in India

Published online by Cambridge University Press:  22 November 2022

Adrien Bussy*
Swiss National Bank and The Lee Kuan Yew School of Public Policy, National University of Singapore (NUS)
Mehtab Ahmed Jagil
The Lee Kuan Yew School of Public Policy, National University of Singapore (NUS)
*Corresponding author: Adrien Bussy, Email:


We investigate tax fraud in a major export-promotion program in India – the Duty Drawback scheme – which enables exporting firms to claim a cash rebate proportional to the value of their exports, at a product-specific drawback rate. We detect fraud based on two approaches. First, we show that bilateral trade asymmetries between reported exports by India and reported imports by trading partners of the same trade flows are systematically correlated with the rate of drawback, suggesting that exporting firms over-report exports to unduly gain duty drawback. Second, we find evidence of excess bunching in the distribution of unit values reported by India at kinks in the per-unit drawback schedule, relative to the distribution of unit values reported by importing countries. Our results suggest that fraud currently detected by customs represents only 3.8%–6% of actual fraud.

Original Article
Copyright © The Author(s), 2022. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Baere, P. de and Du Parc, C. (2009) Export Promotion and the WTO: A Brief Guide. International Trade Centre. Scholar
Brandt, L., Li, B., and Morrow, P.M. (2021) ‘Processing Trade and Costs of Incomplete Liberalization: The Case of China’, Journal of International Economics 131, 103453, Scholar
Bussy, A. (2021a) ‘Corporate Tax Evasion: Evidence from International Trade’, SSRN Electronic Journal, Scholar
Bussy, A. (2021b) ‘Tariff Evasion with Endogenous Enforcement’, Economics Letters 207, 110046.CrossRefGoogle Scholar
Chalendard, C., Duhaut, A., Fernandes, A.M., Mattoo, A., Raballand, G.J., and Rijkers, B. (2020) ‘Does Better Information Curb Customs Fraud?’, World Bank Policy Research Working Paper 9254.CrossRefGoogle Scholar
Chetty, R., Friedman, J.N., Olsen, T., and Pistaferri, L. (2011) ‘Adjustment Costs, Firm Responses, and Micro vs. Macro Labor Supply Elasticities: Evidence from Danish Tax Records’, The Quarterly Journal of Economics 126(2), 749804.CrossRefGoogle ScholarPubMed
Connolly, M. and Yi, K.M. (2015) ‘How Much of South Korea's Growth Miracle can be Explained by Trade Policy?’, American Economic Journal: Macroeconomics 7(4), 188221.Google Scholar
Corfmat, F. and Goorman, A. (2003) ‘Customs Duty Relief and Exemptions’, in Michael Keen (ed.), Changing Customs, International Monetary Fund, 95–110.Google Scholar
Demir, B. and Javorcik, B. (2020) ‘Trade Policy Changes, Tax Evasion and Benford's Law’, Journal of Development Economics 144, 102456.CrossRefGoogle Scholar
Dutt, P. and Traca, D. (2010) ‘Corruption and Bilateral Trade Flows: Extortion or Evasion?’, Review of Economics and Statistics 92(4), 843860.CrossRefGoogle Scholar
Ferrantino, M.J., Liu, X., and Wang, Z. (2012) ‘Evasion Behaviors of Exporters and Importers: Evidence from the US–China Trade Data Discrepancy’, Journal of International Economics 86(1), 141157.CrossRefGoogle Scholar
Fisman, R. and Wei, S.-J. (2004) ‘Tax Rates and Tax Evasion: Evidence from “Missing Imports” in China’, Journal of Political Economy 112(2), 471–496.CrossRefGoogle Scholar
Gupta, S. (2018) ‘Corporate Frauds and the Auditor's Responsibility’, NICE Journal of Business 13(2), 87–89.Google Scholar
Ianchovichina, E. (2007) ‘Are Duty Drawbacks on Exports Worth the Hassle?’, Canadian Journal of Economics 40(3), 881913.CrossRefGoogle Scholar
Javorcik, B.S., and Narciso, G. (2008) ‘Differentiated Products and Evasion of Import Tariffs’, Journal of International Economics 76(2), 208222.CrossRefGoogle Scholar
Javorcik, B.S., and Narciso, G. (2017) ‘WTO Accession and Tariff Evasion’, Journal of Development Economics 125, 5971.CrossRefGoogle Scholar
Kee, H.L. and Nicita, A. (2022) ‘Trade Fraud and Non-Tariff Measures’, Available at SSRN 4019050.CrossRefGoogle Scholar
Kleven, H.J. (2016) ‘Bunching’, Annual Review of Economics 8, 435–464.CrossRefGoogle Scholar
Kumar, B.V. (1999) ‘Frauds against the Revenue’, Journal of Financial Crime 7(2), 175–178.CrossRefGoogle Scholar
Mishra, P., Subramanian, A., and Topalova, P. (2008) ‘Tariffs, Enforcement, and Customs Evasion: Evidence from India’, Journal of Public Economics 92(10-11), 19071925.CrossRefGoogle Scholar
Panagariya, A. (1992) ‘Input Tariffs, Duty Drawbacks, and Tariff Reforms’, Journal of International Economics 32, 13147.CrossRefGoogle Scholar
Prakash, N. (2013) ‘Forensic Accounting: A Budding Field in India’, Indian Journal of Accounting 45(1), 102111.Google Scholar
Rauch, J.E. (1999) ‘Networks Versus Markets in International Trade’, Journal of International Economics 48, 735.CrossRefGoogle Scholar
Saez, E. (2010) ‘Do Taxpayers Bunch at Kink Points?’, American Economic Journal: Economic Policy 2(3), 180212.Google Scholar
Sequeira, S. (2016) ‘Corruption, Trade Costs, and Gains from Tariff Liberalization: Evidence from Southern Africa’, American Economic Review 106(10), 30293063.CrossRefGoogle Scholar
Stoyanov, A. (2012) ‘Tariff Evasion and Rules of Origin Violations under the Canada–US Free Trade Agreement’, Canadian Journal of Economics/Revue canadienne d’économique 45(3), 879902.CrossRefGoogle Scholar
Swenson, D.L. (2001) ‘Tax Reforms and Evidence of Transfer Pricing’, National Tax Journal 54(1), 725.CrossRefGoogle Scholar
Waseem, M. (2020) ‘Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax’, SSRN Electronic Journal, Scholar
Supplementary material: PDF

Bussy and Jagil supplementary material

Bussy and Jagil supplementary material

Download Bussy and Jagil supplementary material(PDF)
PDF 439 KB