Financial Fraud Allegations Surface as Tunisia’s Post-Revolution Economy Struggles
Amidst the calls for an end to the abuse of power by Tunisia’s ruling elites during the Arab Spring protests, new research sheds Light on the extent of such misdeeds. The study reveals a pattern of financial impropriety by firms linked to Tunisia’s former President Zine El Abidine Ben Ali and his family, costing the government roughly $1.2 billion in taxes.
Under-reporting of Taxes byBen Ali’s Family Firms
The study conducted by a team of economists 1 revealed that during Ben Ali’s tenure, firms owned by him and his family had a propensity to bypass import tariffs. This was uncovered by comparing tax declarations and export data between 2002 and 2009.
- Tax evasion by the Ben Ali family firms has decreased since the Jasmin Revolution in 2010
- Overall tax evasion has surged
Evasion Gaps: A Deceptive Practice
Measuring this deceptive practice, called “evasion gaps,” involves comparing the discrepancies between reported imports and exports between Tunisia and foreign countries. If import declarations are accurate, the import and export data for the same product from the same country should closely align 2. However, significant differences indicate evasion gaps. Ben Ali’s firms showed the most substantial evasion gaps.
- Higher tariffs increased the potential gain for evaders
- Prices reported by Ben Ali’s firms were lower than their competitors during the Ben Ali era
Price Distortion from Privatizations
To investigate further, the team found that companies sold to the Ben Ali family following privatization were likely to report significantly lower prices for imported goods compared to those sold to non-connected entrepreneurs 3. This led to a price distortion that skewed the import data, resulting in lower reported tariff revenues for the Tunisian government 4.
Ramifications of Financial Fraud
Beyond financial implications, these fraudulent practices have ramifications for fairness and efficiency within the economy.
- Unfair playing field for those who comply honestly
As the revolution weakened Ben Ali’s grip on power, overall corruption in Tunisia persisted or intensified 5.
- Has the revolution merely democratized the corruption in Tunisia?
- Stay tuned for further insights and potential solutions.