Smuggling via e‐commerce: effect on tax revenue

Abstract

PurposeIn recent years, economists have begun to investigate the impact of internet shopping (e‐commerce) on smuggling and the associated loss in tax revenues. The evidence thus far has been mixed, with some studies concluding that the tax loss is substantial, while others find little impact on tax revenues. The purpose of this paper is to take a new approach to analyzing the impact of internet shopping on smuggling and the associated loss in tax revenues.Design/methodology/approachUnlike previous studies, the paper uses disaggregated panel data and econometric methods to estimate the effect of e‐commerce on the smuggling of various types of commodities.FindingsThe paper finds that e‐commerce has led to the increased smuggling of some commodities, but not others, which may help explain the mixed tax‐loss results that have been obtained in previous studies (which use aggregate data).Practical implicationsThe paper identifies those commodities that are more susceptible to smuggling via e‐commerce. This information should be useful to policy makers.Originality/valueThe paper takes a new approach to estimating the impact e‐commerce has on tax revenues. It also helps explain the mixed results obtained in previous studies.