Coordinating tariff reduction and domestic tax reform

Keen, Michael; Ligthart, Jenny E.

doi:10.1016/s0022-1996(01)00123-4

Cited by 158 publications

(141 citation statements)

References 13 publications

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“…This differs considerably from Piggott and Whalley (2001), Emran and Stiglitz (2005), and Boadway and Sato (2009) who assume perfect competition. In a model with homogeneous but imperfectly-competitive firms, Keen and Ligthart (2002) demonstrate that the welfare effects of tariffs and VAT can be quite different than when perfect competition is assumed. Therefore we too utilize imperfect competition.…”

Section: The Differentiated Product Sectormentioning

confidence: 93%

“…Given that international convention is that taxes should be non-discriminatory, we adopt this approach. 16 …”

Section: The Differentiated Product Sectormentioning

confidence: 99%

“…The home firm that is indifferent between being formal and informal 16 For example, Article 24 of the OECD's model tax convention (2003) rules out discriminatory VAT.…”

Section: Equilibrium Firm Cutoffsmentioning

confidence: 99%

“…First, in contrast to the perfectly competitive settings of Piggott and Whalley (2001), Emran and Stiglitz (2005), and Boadway and Sato (2009), this is a model of imperfect competition. This is important because, as discussed by Keen and Ligthart (2002), many of the welfare predictions regarding tariffs versus VAT can change dramatically when imperfect competition is introduced. One such impact is that we find that a tariff reduction lowers domestic VAT receipts because of the additional competition from foreigners reduces output from domestic firms.…”

Section: Introductionmentioning

confidence: 99%

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Tariffs versus VAT in the presence of heterogeneous firms and an informal sector

Davies

Paz

2011

Int Tax Public Finance

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The debate over the use of tariffs or value added taxes in developing countries has focused on the difficulty of collecting VAT from the informal sector of the economy. This paper contributes by considering this issue with heterogeneous firms and endogenous entry. This yields two new results. First, a cut in the tariff in and of itself can reduce the size of the informal sector. Second, the imposition of a VAT need not increase the number of informal firms. In fact, for many parameterizations of the model, higher VAT reduces informality. Despite this, whether a revenue neutral shift from tariffs to VAT increases or decreases welfare depends on the parametrization. Therefore while this move may be welfare improving in some cases, it is not a one-size fits all policy. * We thank John Rust for suggestions about the numerical simulations, and Matthew T. Cole and James Markusen for helpful comments. All remaining errors are our own.

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Section: The Differentiated Product Sectormentioning

confidence: 93%

“…Given that international convention is that taxes should be non-discriminatory, we adopt this approach. 16 …”

Section: The Differentiated Product Sectormentioning

confidence: 99%

“…The home firm that is indifferent between being formal and informal 16 For example, Article 24 of the OECD's model tax convention (2003) rules out discriminatory VAT.…”

Section: Equilibrium Firm Cutoffsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Tariffs versus VAT in the presence of heterogeneous firms and an informal sector

Davies

Paz

2011

Int Tax Public Finance

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“…In theory it is easy to accomplish (Agbeyegbe, 2006), (Keen & Ligthart, 2002), (Keen & Ligthart, 2005) and (Mujumdar, 2004). After all if you reduce a tax like tariffs, simply increase another type of tax to make up the shortfall.…”

Section: Trade Liberalizationmentioning

confidence: 99%

Determinants of Latin America’s Overreliance on International Trade Taxation

McCoon

2015

AFR

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This paper investigates the determinants of Latin America's overreliance on international trade taxation as a source of governmental revenue. Latin America, more than any other region of the world relies on international trade taxation as a source for governmental revenue. A number of hypotheses are tested including ordinary least squares regressions of the effect of income inequality on the extent to which a country relies on international trade taxation as a source of governmental revenue. It is hypothesized that counties with high levels of income inequality have difficulty collecting income taxes and accordingly disproportionately rely on international trade taxation. The analysis indicates that there is a statistically significant correlation between Latin America's high levels of income inequality and its reliance on international trade taxation as a source of governmental revenue. As a consequence of Latin America's excessive reliance on international trade taxes further trade liberalization in the region will be unlikely.

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Revenue loss compensation mechanisms in regional trade agreements

Walkenhorst

2006

J. Int. Dev.

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For countries that have weak domestic tax administrations and rely heavily on trade taxes for government finances, lowering or eliminating tariffs on trade with regional partners can constitute a significant fiscal risk. In order to nevertheless pursue regional integration, provisions on revenue loss compensation have been introduced into a number of regional trade agreements. This paper reviews, compares and analyses the central design features of existing mechanisms. The discussion suggests that arrangements of limited duration that are based on revenues from domestic taxes while distributing compensation funds according to historical payout criteria have the best prospects of success. Copyright © 2006 John Wiley & Sons, Ltd.

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Coordinating tariff reduction and domestic tax reform

Cited by 158 publications

References 13 publications

Tariffs versus VAT in the presence of heterogeneous firms and an informal sector

Tariffs versus VAT in the presence of heterogeneous firms and an informal sector

Determinants of Latin America’s Overreliance on International Trade Taxation

Revenue loss compensation mechanisms in regional trade agreements

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