Misinvoicing in Benin's International Trade: An Analysis from Mirror Statistics

Abstract

The aim of this work is twofold : to measure the level of misinvoicing in Benin's trade with its main trading partners and to determine its causes. First, based on mirror statistics, we estimate the gross trade discrepancies at about $3.065 billion on average over the period 2000-2017. Its very important development represents more than 350% increase in 18 years. Fraud is dominated by under-invoicing of both imports and exports. The countries most prone to fraud are mainly Asian countries (China, India, and Malaysia), while the most misreported products are mainly those with low proportions of trade (fabrics, textiles and second-hand goods, palm oil, vehicles and motorcycles, cashew nuts, wood and wooden goods). Second, the econometric results obtained from the Pannel Corrected Standards Errors (PCSE) methods showed that the determinants of misinvoicing are customs tariffs, the Benin/Nigeria tariff differential, the share of trade in a product, and indicator variables such as the introduction of the PVI, the perishability of a product, the region of origin, and the tariff and non-tariff measures enacted in recent years. In light of our results, Benin needs to review its trade policy and work toward more effective management of its international trade flows. At the same time, international organizations such as the WTO and the WCO must cooperate and coordinate the management of international trade to control fraud.