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Coordinating Tariff Reduction and Domestic Tax Reform
Author:
Mr. Michael Keen
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and
Ms. Jenny E Ligthart
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Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 093
Language:
English
Publication Date:
01 Jul 1999
DOI:
https://doi.org/10.5089/9781451851632.001
ISBN:
9781451851632
ISSN:
1018-5941
Pages:
20
Keywords:
WP; production efficiency; tariff reform; tax reform; intermediate inputs; imperfect competition; reform of the kind; tariff revenue; tariff reduction; revenue function; reform literature; tax-tariff reform; reform design; reducing tariff; Tariffs; Consumption taxes; Consumer prices; Producer prices; Consumption; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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A key obstacle to fundamental tariff reform in many developing countries is the revenue loss that it ultimately implies. This paper establishes a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenues, showing that for a small open economy, a cut in tariffs combined with a point-for-point increase in domestic consumption taxes increases both welfare and public revenues. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features as nontradeable goods, intermediate inputs, and imperfect competition.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1999: Issue 093