Estimation, Contributing Factors, and Strategies for Mitigation
Abstract
Given the importance of foreign exchange issues in the current state of Iran’s economy, challenges such as capital flight require greater attention. Export underreporting is one method of capital flight that can simultaneously be considered a form of money laundering and tax evasion, thus warranting serious consideration by policymakers. Export underreporting typically occurs in multiple exchange rate systems. In such systems, exporters understate the value of their exports in order to avoid repatriating foreign currency earnings at the lower official exchange rates. However, given the critical role of returning export revenues to the domestic economic cycle, it is essential for policymakers to conduct a comprehensive assessment of export underreporting and develop strategies to address it.
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Estimation of Export Underreporting in Iran
Since the introduction of mandatory repatriation of export earnings in late 2018, Iran’s export underreporting has steadily increased—from 4.7% to 12.1% by 2022. This underreporting, driven by price discrepancies and exchange rate distortions, is estimated to exceed $5 billion in non-oil exports.
exports.
Factors Influencing Export Underreporting and Proposed Countermeasures
The main driver of export underreporting in Iran is the gap between the official (NIMA) and free market exchange rates. When this gap narrows, underreporting decreases; when it widens, underreporting rises. Long-term exchange rate unification and short-term enforcement are key solutions.
Key measures include:
- Data-driven oversight using domestic and international trade data to detect anomalies.
- Red flag indicators to identify suspicious transactions for further review.
- Interagency cooperation between customs, the FIU, tax authorities, and the Central Bank to combat violations effectively.
This study was conducted at Monetary and Banking Research Institute by Sajad Ebrahimi in 2024.
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