Using fixed cargo scanners to combat tax evasion in Uganda
This policy brief describes the implementation of fixed cargo scanners at border control points to analyse how scanners impact undercounting, undervaluing and misclassification, and consequently, tariff revenues and tax evasion.
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Davies et al Policy brief May 2024.pdf
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- Low-income countries (LICs) often rely on trade taxes for revenue but struggle with tax evasion due to undercounting, undervaluing, and misclassifying imports, necessitating enhanced enforcement mechanisms.
- This research studies the implementation of fixed cargo scanners at two border control points in Uganda in 2018 to analyse whether the scanners impacted such undercounting, undervaluing and misclassification, and consequently, on tariff revenues and tax evasion.
- The research finds ambiguous effects: While scanner implementation increased reporting of taxed goods, suggesting a successful reduction in undercounting and misclassifying goods, it also likely led to underpricing, which resulted in lower import values and reduced tax collections, particularly VAT receipts.
- The research reveals several policy recommendations, most importantly the need for a holistic approach to combat evolving evasion tactics effectively. These recommendations include implementing robust price audit mechanisms, enhancing scrutiny of frequent importers, fostering international cooperation, maintaining scanner efficiency, and providing advanced training for customs officers.