India lost $13 billion to trade misinvoicing
New Delhi: India lost a staggering $13 billion, over Rs 90,000 crore, to trade misinvoicing, equivalent to 5.5 per cent of the value of the country's total revenue collections in 2016, according to a report by the US-based think tank Global Financial Integrity.
In 2016, almost two-thirds of Indian imports that appear to be most at risk for some degree of potential revenues losses are imports from just one country, China, which was by far India's largest source of imports in that year, GFI said in its latest report released this week.
The report, "India: Potential Revenue Losses Associated with Trade Misinvoicing", analyses India's bilateral trade statistics for 2016 (the most recent year for which sufficient data is available), published by the United Nations (Comtrade).
"Trade misinvoicing is a reality impacting India and every other country of the world. Imports coming into a country can be over-invoiced in order to shift money abroad, or imports can be under-invoiced in order to evade customs duties or value-added tax (VAT)," the report said.
Similarly, exports going out of a country can be under-invoiced in order to shift money abroad. Exports are occasionally over-invoiced, in order to reclaim VAT taxes for example, it said. Regardless of which method is used, it said, the results are the same: large amounts of tax revenues not being collected.
India should encourage all governments to adopt and fully implement all of the Financial Action Task Force's (FATF) anti-money laundering recommendations, the report suggested, adding that laws already in place should be strongly enforced.
"India should encourage all governments to require multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries and staff levels on a country-by-country basis," it said.
Of the total estimated potential lost revenue of $13 billion, approximately $4 billion was due to export misinvoicing and approximately $9 billion due to import misinvoicing, it said.