Study: Trade invoice fraud cost U.S. $2.3 trillion in tax revenue

Miami Herald Staff

Corporate tax evasion and money laundering have cost the U.S. $2.3 trillion in tax revenue, according to an analysis by a professor at Florida International University.

The study, by FIU College of Business professor John Zdanowicz, a fraud expert, indicates that U.S. companies used false invoices to mask the true value of imported and exported goods. The study covers the period from 2003 to 2014 and is based on U.S. Customs data.

As international banking as become more closely tracked, criminals increasingly have turned to false invoicing, found Zdanowicz, growing from $168.31 billion in 2003 to $230.58 billion in 2014 — a 30 percent increase.

Zdanowicz developed a software program to reveal inflated prices on imported goods and lower-than-normal prices on exported goods. The difference is then captured in tax savings or shifted into offshore accounts.

According to a release, China tops the list of countries with the highest amount of estimated U.S. tax losses due to abnormal trade pricing in 2014. Trade with other countries that resulted in large U.S. tax losses include Canada, Mexico, Japan and Germany.

Among the cases identified:

  • Prefabricated metal buildings exported to Vietnam for $50.78
  • Unworked diamonds imported from Botswana for $4,878.33 per carat
  • Vitamin E imported from Ireland for $30,334.36 per kilogram
  • Chinese imports of single line telephones for $146.32 each and brooms for $61.37 each
  • Used bulldozers imported from Japan for $458,571.43 each
  • Guided missiles exported to Saudi Arabia for $30,247.66
  • Steel ladders exported to Mexico for fifteen cents each