DMA Dialogues | Corruption in Customs
83153
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Corruption in Customs

World Bank

Corruption in Customs

This paper presents a new methodology to
detect corruption in customs and applies it to Madagascar’s
main port. Manipulation of assignment of import declarations
to inspectors is identified by measuring deviations from
random assignment prescribed by official rules. Deviant
declarations are more at risk of tax evasion, yet less
likely to be deemed fraudulent by inspectors, who also clear
them faster. An intervention in which inspector assignment
was delegated to a third party validates the approach, but
also triggered a novel manifestation of manipulation that
rejuvenated systemic corruption. Tax revenue losses
associated with the corruption scheme are approximately 3
percent of total taxes collected and highly concentrated
among a select few inspectors and brokers.