Cross-border Taxation

Illicit financial flows (IFFs) and other cross-border financial activities pose major challenges for domestic revenue mobilization (DRM), particularly in low- and middle-income countries. Strengthening DRM requires effective policy responses at both national and international levels, as well as a stronger evidence base on the channels through which cross-border flows occur and how they can be addressed.

The Research and Capacity Building for Domestic Resource Mobilisation (DRM) Project is a collaborative initiative between UNU-WIDER and the University of Copenhagen Development Economics Research Group (UCPH-DERG) funded by Norad. Cross-border flows can take many forms ranging from informal trade and corruption at the border points to financial transactions that reduce transparency and weaken tax bases. Yet rigorous evidence on the mechanisms driving these flows remain limited, especially in settings where data constraints and reporting biases make standard approaches difficult.

The project builds new evidence on cross-border flows through a combination of experimental approaches and econometric analysis. It examines how incentives and perceptions shape trading behaviour, how corruption risks influence interactions at the borders, and how cross-border financial flows can be detected and analysed using administrative and trade data.