tax evasion

Economics and tax officials in Puerto Rico estimate that the territory fails to collected an estimate $800 Million in tax revenue from due to unreported income each year.

The island currently has a 7 percent sales tax that residents avoid through the use of cash transactions.

According to data from the US Treasury, over 80 percent of self-employed people in Puerto Rico claim on taxes that they earn less than

$15,000 per year. 69 percent of sole business proprietors report earnings that are below $11,000 a year.

37 percent of corporations report losses.

In total, financial intelligence officials estimate that the underground economy (excluding drug trafficking and criminal activities) in Puerto Rico is worth $16 Billion.

(Key statistics about money laundering.)

Source:  Associated Press, “Puerto Rico fights tax evasion as it seeks new revenue sources,” Star Tribune, March 8, 2015.

The underinvoicing of imports from China into Bangladesh is estimated to be as high as $3 Billion a year.

Underinvoicing is the fraudulent method of paying for invoices and taxes. The Economist used an example where a importer in Bangladesh orders $10 in goods from China. Rather than paying the full amount, the importer pays $1 through the official invoice and pays the remaining $9 through an informal system of money.

The benefits for both the exporter and the importer is that they are able to avoid their tax payments. If underinvoicing was eliminated in Bangladesh, economists estimate that the government could increase its tax-to-GDP ration by 1.5 percent.

Source:  “Counterfeit counterfoils,” Economist, September 3, 2013.