Tax evasion; public and political corruption and international trade: a global perspective
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 21 May 2021
Issue publication date: 22 November 2021
Abstract
Purpose
This study aims to examine the significance of public/political corruption; trade tax revenue (import and export) on tax evasion in a group of 140 countries for the period 2008–2017. Sampled countries were subsequently grouped into four clusters for further testing. With the increase in globalization and technology, there is a potential of increased tax corruption on trade tariffs revenue activities.
Design/methodology/approach
The empirical testing was carried out using the technical and more advanced dynamic two-step system-generalized moment method. The econometrical method solves the problem of autocorrelation and heteroskedasticity on cross-sectional data. This study used the data from World Bank, Transparency International, World Economic Forum and Kaufmann’s governance indicators.
Findings
There is statistical interaction between the corruption perception index (CPI) and international trade activities. Moreover, other results revealed that CPI and trade tax revenue activities are statistically insignificant to tax evasion in three groups; low corrupt countries, high corrupt and trade surplus countries although the coefficient signs remain consistent. This can be attributed by a low level of corruption in the low corrupt countries or concealment of corruption-related information in high corrupt countries and the low level of import evasion in trade surplus countries.
Originality/value
Based on the theory and results, public and political officials should promote good corporate governance by strictly monitoring trade revenue activities because parties involved can use technical criminality to conceal illegal behavior. Additionally, all jurisdictions should apply the economic theory of crime, especially in high political corrupt countries and perennial trade deficit countries because key macroeconomic tax revenue activities such as imports invite numerous forms of dishonesty.
Keywords
Acknowledgements
Funding: This research is financially supported by the National Natural Science Foundation of China (Grant No. 71973054, 71774071) and the Key Project of Jiangsu Social Science Fund, China (Grant No. 20ZLA007).
The authors are grateful to the journal’s Editor-in-Chief Professor John Jahera, editorial team and anonymous referees for their invaluable suggestions and comments on earlier drafts of this paper. The first author gratefully acknowledges expert contribution from Professor Stephen Mago (Applied Research Professor at Nelson Mandela University in South Africa), Professor Long Xingle (Financial Econometrics Professor at Jiangsu University in China), Dr Nelson Ruwa (Computer Science at Arupe University in Zimbabwe). We would like to thank invaluable comments and suggestions received at the 8th Chinese SINO conference held in 2018.
Citation
Kurauone, O., Kong, Y., Sun, H., Famba, T. and Muzamhindo, S. (2021), "Tax evasion; public and political corruption and international trade: a global perspective", Journal of Financial Economic Policy, Vol. 13 No. 6, pp. 698-729. https://doi.org/10.1108/JFEP-04-2020-0067
Publisher
:Emerald Publishing Limited
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