Estimating Informal Trade across Tunisia's Land Borders

This paper uses mirror statistics and research in the field to estimate the magnitude of Tunisia's informal trade with Libya and Algeria. The aim is to assess the scale of this trade and to evaluate the amount lost in taxes and duties as a result as well as to assess the local impact in terms of income generation. The main findings show that within Tunisian trade as a whole, informal trade accounts for only a small share (5 percent of total imports). However, informal trade represents an important part of the Tunisia's bilateral trade with Libya and Algeria, accounting for more than half the official trade with Libya and more than total official trade with Algeria. The main reasons behind this large-scale informal trade are differences in the levels of subsidies on either side of the border as well as the varying tax regimes. Tackling informal trade is not simply a question of stepping up the number of controls and sanctions, because differences in prices lead to informal trade (and to an increase in corruption levels among border officials) even in cases where the sanctions are severe. As local populations depend on cross-border trade for income generation, they worry about local authorities taking action against cross-border trade. At the same time, customs officials are concerned about the risk of local protests if they strictly enforce the tariff regimes in place. This issue will become even more significant if fuel prices in Tunisia rise again as a result of a reduction in the levels of domestic subsidies.