tax evasion

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.