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[tax] Another GFI misinvoicing report. The usual story: org that argues misinvoicing is a big problem that can be revealed by crunching Comtrade data crunches Comtrade and says it finds misinvoicing ...it then goes on to recommend that countries buy its proprietary solution.https://twitter.com/IllicitFlows/status/1154496712339316745 …
We know customs fraud is a problem. And we know that if you crunch the gaps and mismatches in Comtrade data you can reliably produce big numbers. What we don't know is whether these numbers say anything meaningful about the reality of the problem
GFI has improved its methodology over recent years and now publishes more granulated product and country level information about what might be happening. Here they find the big fraud is going on in imports of essential oils (HS33)pic.twitter.com/wTVi8Z12K0
What strikes me hard is their lack of curiosity about this finding. Something weird is going on in the data on essential oil imports. The main partner it happens w is Ireland. A quick look in Comtrade myself: this is what it looks like (top 4 import sources as reported by Egypt)pic.twitter.com/DgTtQacWIO
You could go further into Comtrade & break it down. Is this mint, lemon, orange, clove? Are the differences in price or quantity? What is the pattern over years? You could find someone who knows something about the trade in essential oils between Ireland & Egypt & talk to them
But GFI don't do this. They give us a bit of clipart of a bottle of essential oil, and thats that.pic.twitter.com/8kL7LrPN79
What they do do is apply some assumptions to the various gaps and mismatches and come up with a big number for lost tax revenues.pic.twitter.com/JWytF41mKv
They then apply this big number to the spending pattern of a UNDP programme in Egypt to come up with some big numbers on spending on 'lost' spending on SDGs.pic.twitter.com/CtzLzULxHK
Did you catch that move? It would be more parsimonious (& democratically accountable) to assume that each additional $ collected by the Government of Egypt would be spent according to its own priorities (as reflected in its whole budget) rather than that of a UNDP programmes.
The revenue loss calculation is all kinds of shaky. According to GFI importers declaring overpriced imports evade corporate income tax but don't pay extra VAT or import tariffs. Importers declaring underpriced imports evade VAT & tariffs but don't get clobbered by higher CIT bill
Maybe the fraudsters are achieving this 'heads I win, tails you lose' outcome through clever means and dodgy accounting all along the chain, but its a lot of assumption to come up with the number.
Uncollected VAT on apparently underpriced imports is the biggest one. But unless the importers are the final consumer, or the products are going into the black market surely the VAT would be collected anyway down the line? 
Why are GFI, the funder of this report @FordFoundation , the members of the transparency and accountability community @TAInitiative @FinTrCo all so willing to keep churning out these reports, and so uninterested in scrutinising and seriously considering their findings?
If you believe the misinvoicing methodology works to uncover real large scale fraud you should be chasing down the story of the Ireland-Egypt essential oil trade, not bundling it into a spurious headline about billions for the SDGs.pic.twitter.com/jDInBFB1iA
.... Unless the whole point of the methodology is to come up with big numbers. ..... because they can be used to argue for policies on transparency and accountability....
I like transparency and accountability. Its a good hypothesis and hope. The idea that if people have access to data about what their govt & other powerful organisations are doing they will hold them accountable. But it is a dynamic that has to be built by people & organisations
How can foundations contribute to that that if they are satisfied to keep funding the same organisations to produce the same reports, with the same lack of curiosity and scrutiny. ....."We need more transparency!" But don't look too closely at the analysis!
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