Three ways in which the government may lose tax revenue on imports are:-
1. Collusion
2. Use of wrong rates or valuations for goods
3. Conversion of goods on transit for local use.
Collusion may take place between customs officials and taxpayers in order to escape or pay less tax.
Wrong rate or valuations may result due to improper import declaration procedures, poor inspection procedures. Goods destined for other countries which are on transit to such countries may be converted and sold in the country so that no duty is paid on them.
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