- Reint Gropp, Liam Ebrill, and Janet Stotsky
- Published Date:
- July 1999
© 1999 International Monetary Fund
Production: IMF Graphics Section
Typesetting: Choon Lee
Figures: In-Ok Yoon
Library of Congress Cataloging-in-Publication Data
Ebrill, Liam P.
Revenue implications of trade liberalization/ Liam Ebrill, Janet Stotsky, and Reint Gropp.
p. cm, – (Occasional paper, ISSN 0251-6365 : no, 180 Includes bibliographical references.
ISBN 1-55775-813-1 (alk. paper)
1. Revenue—Econometric models. 2. Free trade—Econometric models.
3. International trade—Econometric models. I. Stotsky, Janet Gale.
II. Gropp, Reint. III. Series: Occasional paper (International Monetary Fund) ; no. 180. HJ2305.E24 1999
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The following symbols have been used throughout this paper;
… to indicate that data are not available;
n.a. to indicate not applicable;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1994–95 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1994/95) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
A recent Occasional Paper by the staff of the Fiscal Affairs Department of the IMF titled Fiscal Reforms in Low-Income Countries: Experience Under IMF-Supported Programs observed that some countries with Structural Adjustment Facility (SAF) and Enhanced Structural Adjustment Facility (ESAF) programs with the IMF had targeted an increased reliance on revenue from international trade taxes or, in any event, had attained higher ratios of international trade taxes to GDP at the end of the SAF/ESAF-supported adjustment period. This had occurred despite the countries’ apparent commitment to trade liberalization. More generally, for many developing countries, taxes on international trade are still a significant source of revenue. Whereas export tax revenue has declined sharply since the mid-1970s, the same cannot be said of import tariff revenue. The taxation of imports, even as these countries pursued tariff reform, continued to account for a high proportion of total tax receipts in the mid-1990s and were only marginally below the corresponding level in the mid-1970s.
The apparent contradiction between trade liberalization and continuing high trade tax revenue raises the important question of how, precisely, the one affects the other. Although policymakers generally recognize the long-term benefits of trade liberalization, some have argued for at least a slower pace, in part because of revenue concerns. This paper seeks to address these issues in three complementary ways: through an overview of the factors that may have a bearing on the question, through a review of trends in trade tax revenue both globally and in selected countries, and through econometric analysis.
The authors are especially indebted to George T. Abed for his overall guidance and helpful suggestions on the various drafts. The authors also thank the IMF’s Executive Board members for comments and suggestions and would like to recognize the comments received from numerous colleagues, notably Stanley Fischer, Jesus Seade, Robert Sharer, Michael Keen, Julio Escolano, Angelo Faria, Victoria Summers, and Judy Dean. The comparative analysis of selected countries owes much to input received from Dominique Simard and Zühtü Yücelik. Asegedech WoldeMariam worked tirelessly and with great precision at compiling the data underlying the tables and the econometric analysis. Administrative support was ably provided by Lyndsey Livingstone and Agnes Basilio, Michael Treadway and Juanita Roushdy of the External Relations Department edited the paper and coordinated production of the publication.
The opinions expressed in the paper are those of the authors and do not necessarily reflect the views of the IMF or its Executive Directors.
An IMF News Brief containing highlights of this paper and a summary of discussion at an IMF Executive Board seminar on the topic was released on February 25, 1999, and is available atwww.imf.org/extemal/np/sec/nb/1999/NB9908.HTM.