THE OBJECT of this paper is to study the place of export taxes in the revenue systems of developing countries and to examine their impact on exports and internal stability. Attention is given not only to formal taxes or duties but also to surpluses of state marketing boards. These surpluses are economically similar to export taxes and, in some countries, have been an important source of government revenue.


THE OBJECT of this paper is to study the place of export taxes in the revenue systems of developing countries and to examine their impact on exports and internal stability. Attention is given not only to formal taxes or duties but also to surpluses of state marketing boards. These surpluses are economically similar to export taxes and, in some countries, have been an important source of government revenue.

THE OBJECT of this paper is to study the place of export taxes in the revenue systems of developing countries and to examine their impact on exports and internal stability. Attention is given not only to formal taxes or duties but also to surpluses of state marketing boards. These surpluses are economically similar to export taxes and, in some countries, have been an important source of government revenue.

Two other measures resembling export taxes are not covered in this paper because they are thought to have special characteristics that call for separate treatment. One of these comprises special taxes on production or income affecting mineral industries which produce mainly or exclusively for export, and royalty or profit-sharing arrangements concerned with these industries. The other measure is multiple exchange rates. While an unfavorable exchange rate (that is, a rate less depreciated than the rates for other transactions) is, for an exporter, equivalent to a tax, it is not commonly a source of government general revenue. The exchange spread is often, in effect, redistributed through the exchange system to subsidize imports and certain other external transactions, including government payments.

Export duties may be specific or ad valorem, or a combination of both: sometimes a sliding scale, which varies rates with export prices, is used. The taxes are levied mostly on agricultural and mineral products in the primary producing countries. They are largely confined to developing countries; few export taxes are now imposed by industrialized countries.

The revenue purpose of export taxes predominates, but other objectives have been prominent.1 Export taxes are employed to compensate for the devaluation of a country’s currency and as a means of stabilizing the economy during a period of fluctuating prices. They have served in some countries as a means of regulating exports with the objective of maintaining prices in world markets in connection with international commodity agreements or cartels. Alternatively, they may be used to restrict the export of goods needed for internal consumption or for further domestic processing. Marketing boards develop surpluses sometimes because their buying prices lag behind rising market prices and sometimes because of their efforts to stabilize the incomes of producers of export crops; in some countries, surpluses have been sought as a source of government revenue.

Historical Background

Historically, the export sector has been the original nucleus of a market economy. The production for export of one or two commodities (mainly agricultural raw materials and minerals) early became a source of revenue because of the ease in assessing duties (or royalties) at the points where the goods left the territory. Subsequently, export duties on raw materials became an obvious device to promote local industries based on their processing for export. In countries where export crops came to be raised by small farmers, export duties were employed in place of a land tax.2

Earlier History

Until the nineteenth century, export duties were widely used in Europe as a source of revenue and a means of preserving raw materials for domestic manufacture. The latter purpose was stressed particularly in countries following mercantilist policies. In England, for example, duties were applied to exports of raw wool and hides by a statute of 1275, and by 1660 had been extended to 212 articles. The liberalization of trade in the nineteenth century largely eliminated export duties in Europe. However, a few duties were continued to foster domestic processing industries or as a means of exploiting monopolistic positions in certain raw materials.3

After their decline in Europe, export duties were maintained and extended in colonial areas of Asia and Africa. To some extent they were designed to favor the shipment of raw materials to the mother country or other destinations in the empire, and the use of national-flag vessels. The main purpose, however, was to raise revenue.4

In Latin America, export taxes were also levied extensively for revenue purposes, and to a much lesser extent to promote local processing of raw materials and to check the influence of foreign capital.5

Usually the countries producing raw materials taxed exports selectively, concentrating the duties on items in which they enjoyed comparatively strong competitive positions. In some countries, however, duties were applied to all or virtually all exports at rates of 1 to 3 per cent; in a few, general export taxes as high as 10 per cent were imposed.

Marketing Boards

During World War II and the immediate postwar period a number of state marketing boards were established in Africa and Asia. Prominent among these were the Nigerian institutions for marketing cocoa, groundnuts, palm kernels and palm oil, and cotton (formed during World War II); the Uganda boards for cotton and coffee (formed during the war and reorganized in 1948); the Ghana Cocoa Marketing Board (formed in 1947); Burma’s State Agricultural Marketing Board for rice; and Thailand’s export monopoly for rice (ended in 1954). Although the functions of the marketing boards varied widely, they were organized primarily for the purposes of improving facilities for the marketing of major export crops, stabilizing prices received by producers, and improving and standardizing quality. In addition, some of the boards served as agencies for the financing of industry-wide benefits and for the collection of export duties and other taxes.6

Until about the mid-1950’s, the boards realized substantial surpluses; thereafter most of them experienced losses in some years. While the classification can be debated, the surpluses are here regarded as equivalent to export taxes (and the deficits as equivalent to negative taxes or subsidies). Like export taxes, the marketing boards’ surpluses constitute a differential between external prices and the proceeds realized by domestic producers. Cumulative surpluses have tended to exceed deficits, and in many countries the surpluses have been channeled to the state through grants or loans. In Nigeria the marketing boards served from their inception as instruments for the mobilization of savings for government-sponsored projects; after the reorganization of the boards in 1954 on a regional, rather than a commodity, basis the regional governments explicitly stated that the surpluses provided an important source of revenue for their development budgets.7

Korean War Period and Later

Interest in export duties was stimulated during the Korean war boom (1950-51), when they emerged as a substantial source of revenue in a number of countries, mainly in Asia and Africa. Rate structures were revised and rates were raised in some countries, while export duties on important products were introduced in others.8 The new or increased duties were levied mainly as temporary measures to siphon off part of the windfall gains, but they have usually been continued, though frequently at lower rates.

Changes in the structure of export taxes, described more fully in the Appendix (p. 481), took the form principally of a shift from specific to ad valorem rates, often accompanied by a sliding scale which varied the rate with the market price. Some countries achieved an approximation to an ad valorem rate structure by enacting a series of specific taxes geared to the price of the commodity quoted on domestic or foreign markets. In many countries, a basic low rate or no tax applied if the price fell below a specified floor. Nigeria replaced its specific duties on major exports by ad valorem taxes (December 31, 1950); this change was shortly followed (March 1951) by a progressive rate schedule which provided a basic rate of 10 per cent to be increased by per cent for every £ 1 by which the value of the commodity exceeded a stipulated minimum price. The Gold Coast (later Ghana) and Uganda also adopted sliding-scale taxes during this period. Ghana’s tax on cocoa exports rose to a marginal rate of 100 per cent when the price of cocoa exceeded £ 260 per ton; Uganda’s duties on coffee and cotton took effect at prices above a relatively low price level. Other equatorial African countries adopted ad valorem taxes, but not generally with progressive rates.

Major producers of export crops in Asia also adopted progressive export-tax schedules after 1950. Some of these taxes have since been dropped or significantly modified. Ceylon introduced sliding-scale schedules in 1951 for tea, coconut products, and rubber. Because of administrative difficulties and declining prices, these ad valorem taxes were superseded within a few years by specific rates. In 1963, however, sliding-scale rates were reintroduced for copra, coconut oil, and coconuts. India instituted a specific tax on tea in 1947; this was replaced in 1955 by a sliding-scale (slab) system, which remained in effect until 1957, when the rate schedule was modified. The export duty on tea, abolished on March 1, 1963, was reinstated at the time of the devaluation in June 1966. It is now levied at a specific rate. Malaya adopted a flat 5 per cent ad valorem duty on rubber in 1947, replacing it in 1951 by a progressive rate system. The current schedule imposes an export duty inclusive of cesses equivalent to an ad valorem rate of 13.8 per cent when the price per pound of rubber is 70 Malayan cents, and to 36.8 per cent when the price reaches 150 Malayan cents (49 U.S. cents) a pound (Appendix, Table 5). Malaya also taxes exports of tin, copra, oil palm nuts, palm oil, bauxite, and many other items. Thailand has imposed ad valorem export duties on rubber in accordance with a slab system, ranging from 5 per cent to 10 per cent. In 1954, when the Government abolished its rice export monopoly, so-called “premiums” on the export of rice were introduced; these are flexible export taxes fixed by the Minister of Economic Affairs, which contribute substantially more revenue than the formal export duties.

Latin American countries also have instituted progressive export-tax rates, especially for coffee. In 1943, El Salvador introduced a schedule of rates graduated with the New York spot quotation for Santos coffee; in 1950 it adopted a new progressive rate schedule with marginal rates ranging from 10 per cent to 30 per cent. Costa Rica in 1950 superimposed a 5 per cent ad valorem tax on a specific rate when the price of coffee rose above a certain minimum. Guatemala’s tax on coffee exports is also higher when the export price exceeds Q 20 per quintal (46 kilos). Ad valorem taxes on exports are levied in several South American countries—including Argentina, Chile, Ecuador, Peru, and Uruguay; other countries, including Colombia and Brazil, rely primarily on exchange rate differentials.

The changes in export taxes during the Korean war boom and the operation of graduated rate schedules greatly increased the effective tax rates on many primary commodities. Generally, effective rates reached their peak during the mid-1950’s; thereafter they declined; a few taxes disappeared completely. Average annual export taxes on tea, for example, reached a peak of 25 per cent in Ceylon in 1955 and 1958, compared with 16 per cent in 1952 and 19–20 per cent in 1959–63 (Appendix, Table 3). Malayan export taxes on rubber rose from 5.4 per cent in 1950 to a peak of 18.9 per cent in 1955 (Appendix, Table 4).

Wide fluctuations have occurred in connection with marketing board operations. In Nigeria, effective export-tax rates on cocoa rose from 2.2 per cent in 1947/48 to 33.8 per cent in 1953/54, and then declined; but because of marked variations in the marketing board’s surplus, the combined effective rates between 1947/48 and 1961/62 ranged from 0.5 to 68.4 per cent (Appendix, Table 6). Similar variations applied to groundnuts, palm oil, and cotton. In Ghana, the average export duties on cocoa ranged from a minimum of 7.8 per cent in 1949/50 to a maximum of 50 per cent in 1954/55; in combination with the marketing board’s surpluses, the average annual rate ranged from 5 to 60 per cent of sales between 1949/50 and 1962/63 (Appendix, Table 7).

Almost all the major tropical agricultural products are now subject to export duties. In Asia, export duties are imposed chiefly on rubber, jute and jute products, coconut products, rice, tea, coffee, cocoa, spices, vegetable oils, wool, cotton, and some textile products. In Latin America, there are export taxes on sugar and sugar products, coffee, cocoa, bananas, cotton, wool, hides, meats, and other products. In Africa, export taxes (including marketing boards’ surpluses) apply to cocoa, coffee, cotton, coconut products, palm oil, sisal, tobacco, spices, and groundnuts. In various countries, duties are also levied on exports of tin, copper, iron ore, bauxite, diamonds, and a few other minerals.

Fiscal Importance

Relationship to Total Tax Revenue

Though generally much less important than in 1950-56, export taxes continue to play a prominent role in the fiscal system of many developing countries. Recent data, for example, indicate that they account for 10 per cent or more of tax revenues of the central governments for 12 countries for which adequate data are available (Table 1).

Table 1.

Selected Countries: Ratio of Export Taxes1 to Total Central Government Tax Revenue 2 and to Export Earnings and Ratio of Exports to Gross National Product

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Sources: International Monetary Fund, U.S. Agency for International Development, and government reports.

Export taxes include formal export taxes as well as marketing board surplus or deficit, regardless of whether transferred to the treasury (in Uganda, Nigeria, Burma, and Ghana). Central government tax revenues include the surplus or deficit of marketing boards, contributions to social security agencies, and taxes collected by other autonomous entities.

Estimates of tax revenues do not take into account revenues derived from multiple exchange rates or exchange taxes (except for Colombia), but do include marketing board surplus (deficit), whether or not transferred to the treasury, as well as formal export taxes. Central government tax revenues include contributions to social security institutions as well as taxes collected by other autonomous entities at the central level.

Includes marketing board surplus (deficit).

Includes government’s participation in the Gezira Scheme, amounting to about 14 per cent of tax revenues.

Includes exchange differential revenue, introduced in 1963.

Includes state tax revenues.

Per cent of gross domestic product.

Because of sudden changes in market prices and tax rates, these ratios vary from year to year. For example, the ratio for Uganda is considerably higher, and that for Ghana considerably lower, than in several immediately preceding years.9 Generally, however, the percentages given in Table 1 are believed to be broadly indicative of the fiscal importance of export duties.

The list could probably be expanded by the inclusion of other African countries for which adequate data are unavailable. On the other hand, as Table 1 shows, a substantial number of developing countries depend very little or not at all on export taxes, despite a large export sector.

While no close relationship exists between the share of export taxes in total tax revenues and the importance of the export sector in the economy, there is some connection. Among the countries covered in Table 1, the average ratio of exports to gross national product (GNP) is 28.5 per cent for countries that obtain 20 per cent or more of their revenue from export taxes, 14.3 per cent for other countries using export taxes, and 11.2 per cent for countries not levying export taxes.10 Where the percentage of total tax revenue obtained from export taxes exceeds the ratio of exports to GNP (as in Uganda, Sudan, Nigeria, Haiti, Colombia, and Mexico), this fact indicates that the export sector is being more heavily taxed, in relation to the value of final output, than the other sectors as a group. It does not follow that elsewhere the export sector is less heavily taxed than other sectors, since the export industries and persons taking part in them are usually subject to general taxes, such as those on income, consumption, and property, as well as to export taxes.

In some countries, as in Ceylon,11 El Salvador, and Peru, export taxes have been coordinated with the income tax. In Peru, export taxes are collected as advance payments on companies’ income tax. Here, producers of cotton, copper, sugar, fish, and fishmeal pay taxes on exports at different rates and receive tax certificates which may be used in payment of income and other taxes within a two-year period. In El Salvador, export duty and income tax are treated as mutually exclusive fiscal measures. Coffee growers are exempt from the levy of an income tax on coffee earnings because there is an export duty on coffee; sales commissions paid to agents of coffee exporters are also exempt.

Instability of Yield

The yield of export taxes has fluctuated widely, as the result of variations in the volume and value of exports combined with changes in export-tax rates and coverage. Table 2 shows export-tax collections, in money amounts and as percentage of total current revenues, for nine countries since the height of the Korean war boom in 1951. The countries covered are those that have been most heavily dependent on export duties on such major export commodities as cocoa, coffee, rice, palm oil, tea, rubber, cotton, and bananas. (Because satisfactory data on the marketing boards’ surpluses over the period are lacking, Table 2, unlike Table 1, does not include these in revenues.)

Table 2.

Selected Countries: Export Tax Collections, 1951–63 1

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Source: United Nations. Statistical Yearbook, 1954-63, except as noted.

Table 2 differs from Table 1 by the exclusion of marketing boards’ surpluses and deficits from export taxes and by the exclusion of revenue of social security and other autonomous agencies from total current revenue.

Data for 1952, 1953, 1962, and 1963 from Central Bank of Ceylon, Annual Report, various issues.

Data from Banco Central del Ecuador, Memoria Anual, 1960 and 1963. Data for 1963 were obtained during a Fund mission. The revenues are for the consolidated public sector (excluding enterprises), whereas those in Table 1 are for the central government and autonomous entities only.

United Nations data used here differ substantially from AID data in Table 1, which include autonomous entities.

Same as in Ghana, Ministry of Finance, Financial Statement. Since 1956, grants from the Marketing Board have been included in the budget, and hence are included for 1952-63. These grants, taken from the Financial Statement, 1951-65, are not the same as the surplus of the Marketing Board. “Contributions” from farmers are included for 1960, 1961, and 1963; none were made in 1962. The year 1956 (1955/56) was extended to a 15-month period, as was 1962 (1961/62) and 1964 (1963/64). The source for 1962 (1961/62) and 1963 (1962/63) is the 1965 budget.

Data only for the Federal Government of Malaya. Data used for 1963 differ slightly from UN figures. Export taxes paid to special funds from the Administration Report on the Customs and Shipping.

Includes both central government and regional revenues, but excludes the marketing boards. The source is Federal Ministry of Information, Estimates of the Federation of the Government of Nigeria, and Gerald K. Helleiner, “The Fiscal Role of the Marketing Boards in Nigerian Economic Development,” The Economic Journal, Vol. LXXIV (1964), pp. 582-605.

Includes “rice export premiums” as export taxes.

Data for 1951–54 from Uganda, Ministry of Planning and Community Development, Statistical Abstract; for 1962-63, from Government of Uganda, Financial Statement and Revenue Estimates. 1954 is a 6-month period.

In general, export-tax revenues rose sharply in 1950 and 1951, and then declined almost as sharply during the post-Korean recession, which reached its low point in 1953-54. Revenues then recovered to a peak, generally in 1955, from which they later receded in all the countries covered in the table except Ecuador and Malaya. Ghana and Uganda experienced the largest fluctuations in the relative importance of export-tax revenues, although Indonesia experienced the largest relative decline.

Fluctuations of revenue pose problems of treasury management and in this respect are disadvantageous. From the standpoint of compensatory fiscal policy, however, variations of tax revenue, accompanied by relatively stable government expenditures, are regarded as desirable because they help to reduce the instability of the economy as a whole. The execution of a compensatory fiscal policy involves difficulties which are discussed below, under “Economic Stabilization” (p. 471).

Incidence and Economic Effects

The legal incidence of export taxes generally is on the “exporter,” from whom the government collects the tax. In countries where a marketing board does not perform this function, the exporter is typically an independent dealer, or he may be a large producer (or agent acting for the producer). The tax, however, usually does not rest on exporters. It may be shifted forward to buyers, that is, paid by foreign consumers; it may be borne by domestic producers; or it may fall on landowners or workers. The final incidence may in time be diffused among consumers, middlemen, producers, landowners, and labor.

Three major questions arise as to the incidence and economic effects of export taxes: (1) In what circumstances can the taxes be partly or wholly shifted forward to foreign consumers? (2) How is the part not shifted to consumers distributed among participants in the production and marketing process in the exporting country? (3) What are the effects on the volume of exports?

The answers to these questions given by economic theory depend heavily on the relative price elasticities of supply and demand for the taxed commodity and the mobility of the factors entering into its production and marketing. By how much would consumption decline if the price rose to cover the tax? By how much would an export tax falling on producers curtail the quantity produced and exported? To what extent would labor, land, and capital be withdrawn from the export industry if wages, rent, or profits were reduced?

Elastic supply and inelastic demand are conducive to shifting of a tax forward to consumers, whereas under conditions of inelastic supply and elastic demand the tax tends to rest on producers. Supply is inelastic when the resources engaged in the production of a commodity are highly specialized in that use and cannot easily transfer to other activities owing to technological conditions or the absence of attractive alternative employments. Also conducive to inelasticity of supply are lack of information about opportunities, insensitivity to economic incentives, and other conditions resulting in immobility. Supply tends to be elastic with respect to price when the resources required for the production of an item are not highly specialized, and when alternative employments exist and are known to resource owners who are able and willing to take advantage of them. Elasticity of world demand depends on consumers’ tastes, prices of competing commodities, and the technical possibilities of substituting other natural or synthetic materials for the commodity, or of modifying production processes to vary the amount of a particular raw material entering into a finished product. Generally, the elasticity of both supply and demand increases with the length of time considered.

While these generalizations offer a framework for analysis, incomplete knowledge of demand and of producers’ behavior in the less developed countries often precludes firm conclusions about particular export taxes. Some of the relevant considerations and evidence are examined below.

Shifting to Foreign Consumers

Most of the primary products that are subject to export taxes are produced for a world market where price is generally determined under competitive conditions. Many of the commodities, in fact, are traded on organized exchanges. The imposition of an export tax by a single producing country will not automatically raise the price. Initially, the exporters of the taxing country will suffer a reduction in their net proceeds equal to the amount of the tax. The world price will rise only if the exports of the taxing country decline and are not replaced by additional exports from other countries.

If the taxing country accounts for only a small part of world production, as is generally true, there is little opportunity for shifting the tax; its exports cannot be sold at more than the world price, and any reduction in their volume can be made up by other countries. Regardless of the elasticity of world demand for the commodity, the elasticity of demand for shipments from one country with a small output will be very high at prices above or below the world price. To be sure, some imports from particular countries are accorded preferential treatment which allows prices above the world market level, as for example French imports of certain products from the French franc area. The degree of preference, however, does not appear to depend on export taxation in the producing country.

When the taxing country supplies a large part of total world exports, or when similar taxes are levied by several countries, there is a greater probability that the tax will be partly reflected in the price in external markets. But such shifting of the tax is limited by the possibility that a price rise will in time stimulate production elsewhere. Other products may be substituted for the taxed one if its price rises—for example, synthetic rubber for natural rubber, one vegetable oil for another, aluminum for copper.

The Chilean natural nitrate industry is a striking example of an industry that was once a natural monopoly which was heavily taxed and organized as a cartel on the assumption that taxes and high prices would be borne by foreign consumers. The rapid rise of synthetic nitrogen production after World War I and the slower growth of by-product nitrogen output faced Chile’s natural nitrates with strong competition. Chilean production fell sharply, and its share in the world market declined to 10 per cent by the early 1930’s. A reorganization of the Chilean industry and a moderation of tax and royalty payments were required.12

When forward shifting of export taxes does occur, it will ordinarily result from a contraction of production induced by an initial reduction in the net price realized by exporters, caused by the imposition of the tax. Producers in the taxing country will suffer a loss of income during the transition period, and even in the long run some of them will lose because they can earn less in the nontaxed industries to which they transfer.

With rare exceptions, countries that are considering export duties should regard them primarily as taxes on their own producers and traders rather than as a means of taxing foreigners.

Distribution Among Producers and Traders

As stated above, the distribution of the export tax among those taking part in the production and marketing process depends largely on the alternative opportunities open to the participants.13 Owners of specialized machinery and equipment or trees may have to bear a large part of the tax in the short run because they cannot readily transfer their capital to other industries. Owners of land particularly suited to the production of the taxed item will share in the tax to an extent that will depend inversely on the yield in the second-best use. If the yield in the alternative use was almost as great, land will tend to be diverted to the other crop and the landowners will escape most of the export tax; if this yield was much less, the owners may keep their land in its original use and accept a lower rent.

Similarly, whether hired workers suffer a wage cut will depend on their ability and willingness to avoid it by finding other jobs or moving to the subsistence sector;14 also, the government may intervene. Big producers may be able to pass backward to wage earners a part or the whole of an export duty in a one-crop economy offering few alternative employment opportunities.15 The possibilities of such backward shifting are limited when workers can move to other industries that are expanding or to the subsistence sector. In some countries, backward shifting is somewhat circumscribed by government controls, which set a floor on wages or vary them with the cost of living or product prices. In Malaya, for example, estate wages are geared to rubber prices and hence have to rise with the price, regardless of the tax burden.16 And, in Ceylon, wages are linked to the cost of living.

In a highly competitive market, traders and other middlemen might share in the export tax if they owned specialized warehouses and other facilities; otherwise they would not be much affected. Competition in many primary producing countries, however, is limited by the absence of well-organized markets, inadequate transportation and storage facilities, and lack of credit. Under these conditions, traders’ margins may be wide. Nevertheless, disproportionate bargaining strength and high profits of traders do not necessarily mean that they will escape an export tax. In fact, at a time when world prices are rising an export tax may skim off additional receipts that would otherwise have accrued to traders. This is believed to have been one result of the Indonesian tax on rubber during the 1950–51 boom. Although world prices doubled, prices received by small-scale producers are said to have increased little; the middlemen and exporters received windfall gains which were reduced by export taxes.17 This will not always be true; taxation often falls on those in the weakest bargaining position. No generalization can be confidently made about the influence of market imperfections on the incidence of export taxes.

In conclusion it may be said that the distribution of the export tax burden among economic groups is frequently unclear. While this uncertainty may sometimes lessen political opposition to export taxation, it has disadvantages for public policy regarding income distribution and production incentives.

Effects on Export Volume

The effect of export taxation on production and on the volume and value of exports is a subject of great importance for the primary producing countries. In the past many observers have argued that moderate taxation would have little influence on export volumes because, over a rather wide range, producers in the less developed countries were insensitive to changes in net prices. Sometimes it was contended that a tax would stimulate output because farmers would have to work harder to satisfy their income aspirations. These possibilities cannot be dismissed, but a growing body of experience, statistical studies, and expert opinion indicate that in most areas the price elasticity of supply of primary products is positive and not negligible.

The discussion may conveniently be divided between the short run and the long run. Because of differences in botanic and technological characteristics, output may react to price changes more quickly for some commodities than for others. Crops such as cotton, rice, groundnuts, and tobacco may be planted and harvested within a single year; sugar cane and bananas are quick-maturing plants that may yield more than one crop in a year. Most tree crops, however, take five to nine years to reach commercial production. With some variations, this is a measure of the time period required for a long-term supply adjustment for cocoa, palm nuts, coffee, tea, and rubber. Considerable time is also involved in developing an ore body—whether of copper, iron, or other minerals. As noted below, however, short-run variations also occur in the tree crops and mineral production.

Short run

Most of the available studies of the short-run responsiveness of agricultural production relate to the general question of price elasticity of supply rather than to the specific issue of how an export tax affects the volume of exports. It may be assumed, however, that when supply shows positive price elasticity, an export tax, by reducing the net price, will ordinarily cause a reduction of exports and a reduction in production if, as is usually true, the domestic market is relatively small.18 Reductions in net price and in export volume should be understood as decreases relative to the levels that would have existed in the absence of the tax, other things remaining the same. If price and volume are rising, owing to market and production conditions, the tax may merely retard the increase in net receipts and export volume.

General evidence of positive price elasticity of agricultural production in the short run is presented in several studies relating to Africa, Asia, and Latin America that have been published in recent years.19 A statistical study that is especially interesting is that of Stern on Egyptian cotton production over the periods 1899/1900-1937/38 and 1948/49-1955/ 56.20 After examining the relative prices of cotton and of competing crops, he concluded that the price elasticity of cotton acreage was about 0.4 to 0.6 (meaning that a 1 per cent reduction in the price of cotton relative to alternative crops would induce about a 0.4 to 0.6 per cent reduction in the area planted to cotton). Unlike an earlier investigator,21 Stern found no indication that growers were less responsive to decreases than to increases of prices.

Another statistical study using relative prices is Dean’s analysis of tobacco production in Malawi over the period 1926-60.22 Dean found production to be significantly responsive to the “real” price (the price of tobacco deflated by an index of the prices of consumer goods) with a one-year lag. Prices lagged two years were much less influential. He also found that tobacco production in Malawi was negatively responsive to increases in wages received by Malawi labor migrants to Rhodesia and South Africa.

Even tree crops show some short-period elasticity with respect to price.23 Rubber production varies with the rate of tapping, which responds to some extent to price changes. A study of Malaya found that production by smallholders was somewhat responsive to price changes but that of large estates was relatively inflexible.24 There is some short-run responsiveness of cocoa production due to variations in the completeness of harvests and in gathering from wild trees.25 Similar conditions exist for coffee. Where gathering from wild trees in uncultivated areas is significant, as for palm oil and palm kernels in parts of Africa, considerable short-run supply flexibility exists.

Mineral production shows some short-run elasticity because of changes in the rate of extraction and in the grade of ore worked. However, marginal costs rise steeply beyond a certain point, and large price changes are needed to affect output much once production surpasses this level.26

Long run

In the long run, the taxation of export crops—whether through duties or marketing boards’ surpluses—tends to bring about a relative contraction in production of the commodity taxed, in the absence of other offsetting factors. This tendency is borne out by the experience of many countries. After 1951, when prices of export crops declined in Indonesia, small producers shifted from the taxed export commodities to rice and other products for home consumption.27 There is also evidence that cocoa-tree planting in Nigeria has responded to price changes; Galletti and his collaborators state that the Nigerian farmer adjusted his planting to the real return currently yielded by his cocoa; that is, he has planted more when he could buy more goods—especially imported goods—with the proceeds of a given weight of cocoa, and has reduced his planting when he could buy less.28 And Ady concluded that “changes in the magnitude of cocoa exports from the Gold Coast in the period 1930–1940 were to be explained largely by the effect upon planting nine years earlier of changes in cocoa prices.” 29 Bateman criticizes Ady’s methods but agrees that plantings are responsive to the price of cocoa and to the price of coffee, an alternative crop; hence production responds to price with a lag which Bateman places at 8 to 13 years.30

Ordinarily a decrease in production will result in a decrease in export volume. A close linkage, however, may not exist where exports are regulated by an international commodity agreement such as the agreements for coffee and cocoa. In the absence of controls, production will tend to exceed export quotas, particularly in countries that enjoy the greatest comparative advantage in producing the commodity. In these conditions a country may be unconcerned about the possible adverse effects on production associated with an export tax or, indeed, may regard the tax as a convenient means of limiting production.

Possible adverse effects of export taxes on production may be offset by improved production methods, or obscured by strong demand. Malaya, for example, introduced high-yielding rubber trees, using part of the proceeds of the export tax for this purpose. Yield per tapped acre rose by 47 per cent between 1955 and 1961.31 Malaya’s share of the world market for natural rubber rose from 33 per cent in 1951 to 42 per cent in 1963. Ghana promoted replanting of cocoa trees with more productive varieties and has increased its share of the world cocoa market since 1960 from about one third to 40 per cent, while Nigeria’s share has remained about the same, despite the existence of higher export taxes and the marketing board’s surpluses in Ghana.32 Ecuador succeeded in promoting its banana production after World War II until it became the world’s foremost producer, although a multiplicity of export taxes were imposed and increased until a combined rate of 21.4 per cent was reached in 1964. A large share of the tax proceeds, however, has been devoted to improving the cultivation of bananas. By 1964, Ecuador’s exports had leveled off; thereafter they declined, partly as a result of the capture of the Japanese market by the Republic of China, which imposes no export tax.

When production costs are rising or market conditions are unfavorable owing to weak demand or the competition of synthetics and natural substitutes, export taxes are likely to appear burdensome. A number of countries have acted to give relief to producers by repealing duties, reducing rates, or offering better prices through their marketing boards.33 There is much evidence, for example, that Indonesia’s export taxes had reached a level by 1952 at which disincentive effects were being experienced by large estates caught in a tax and labor cost squeeze.34 Indonesia reversed its export-tax policy; nevertheless, its share of the world market for natural rubber continued to decline and by 1963 was 28 per cent, compared with 44 per cent in 1951. India repealed its export duty on tea in 1963 (but reinstated it at the time of the devaluation in 1966). In Pakistan, it was decided (in the 1964/65 budget) to reduce the export duty on both cotton and jute by 50 per cent. In 1965, Tunisia suspended its 10 per cent tax on olive oil exports, from April through June, in order to encourage exports; Portugal repealed all its export taxes in January 1966. Peru reduced its export tax on cotton in 1966 because of depressed market conditions.

Significance of changes in exports of taxed products

The available evidence points to the conclusion that if a country imposes a permanent export tax or operates a marketing board so as to keep prices received by producers below world prices, it should ordinarily expect the export volume of the taxed commodity to be absolutely reduced, or its growth retarded, either immediately or after a period of years varying with the production cycle. The principal exception to this generalization relates to exports that are controlled by a commodity agreement or similar arrangement.

The probable adverse effects on exports must be counted as a disadvantage of export taxation as a regular source of revenue. Generally this disadvantage applies even to taxes on traditional exports levied by a country that wishes to diversify exports, since it is usually advisable to achieve diversification by encouraging new exports rather than by deliberately restraining old ones. It does not follow, however, that the effect on export volume is a decisive objection to export taxes. Several considerations are relevant.

First, the few numerical estimates of short-run price elasticity of supply of annual crops and long-run price elasticity of tree crops indicate figures below unity, sometimes below 0.5. While it is unclear how reliable and representative these estimates are, they suggest that the percentage reduction in exports of the taxed agricultural commodity will be smaller than the effective tax rate. In other words, the gain in government revenue will exceed the loss of export earnings of the commodity taxed. Information on the long-run elasticity of mineral exports is even less adequate than that on agricultural exports, and it is hard to say how the revenue gain from a tax on minerals will compare with the export loss.

Second, a reduction in production and exportation of the taxed commodity usually does not entail an equal reduction in total production. Resources that are transferable from the production of the taxed commodity may be used in other industries. The loss will not be the gross amount of their product but the difference between their (social) productivity in the taxed export industry and in the industry to which they are transferred. The latter may also be an export industry or an import-substitute industry.

Third, alternative taxes may also adversely affect production and exports. Since revenue must be obtained, the question to be answered by policymakers is how this can be done with the least harm while observing the requirements of equity and administrative efficiency. Some further comments on this point appear in the concluding section of this paper.

Economic Stabilization

Considerable attention has been given to the use of export taxes as a countercyclical device to stabilize the economy.35 Even with constant rates, export-tax collections often fluctuate more widely than other revenues, owing to the volatility of exports of many primary products. The flexibility of export-tax yield can be greatly increased by varying tax rates directly with export prices, through changes in the tax law or through the application of sliding-scale rates. The variations of export taxes can capture part of the gains arising from a rise in world prices and mitigate the effect of a price decline on producer incomes. The government is thereby enabled to build up reserves in periods of prosperity which it can expend in periods of recession and thus reduce fluctuations in money income and expenditures and in imports. The policy, it should be noted, requires that the accumulation and use of fiscal reserves be accompanied by like movements in foreign exchange reserves. Successful pursuit of a policy of this kind would go some way toward insulating the economy from the effects of export fluctuations and would perform a stabilization function that could not be as directly discharged by monetary policy owing to the inability of the latter to regulate the primary changes in money income associated with fluctuations of external demand.36

Adjustments to Fluctuations in Commodity Prices

The increase in export-tax rates and the adoption of sliding-scale rates during the Korean war boom comprise perhaps the widest application up to now of export tax adjustments for stabilization purposes. These were only moderately successful in absorbing incremental export earnings. For example, in Malaya the export duties captured only 8 per cent of the substantial increase in export earnings from rubber and tin during 1950/51; in Indonesia, they captured 14 per cent of the increase in total export earnings.37 Through sliding scales, the Government in Ceylon absorbed 20 per cent of the rise in rubber prices. In Pakistan, about 20 per cent of the price rise during the boom was absorbed.38 This unimpressive performance was due partly to delays in tax legislation. For instance, Ceylon, Pakistan, and India revised their export-tax rates only during the last quarter of 1950; the duty on rubber was raised in Malaya in January 1951 and in Ceylon later in 1951, after rubber prices had already turned downward.

Certain countries with marketing boards were more successful in appropriating part of the additional earnings. In Burma, the State Agricultural Marketing Board kept the purchase price paid to farmers for rice unchanged from 1948 to the crop year 1955/56, while the world market price rose (during 1948 to 1953). Marketing boards for rice in Thailand and cocoa in Ghana appropriated a substantial share of the incremental earnings. In Ghana, however, the price paid to the producer was raised by 50 per cent in 1950, and by a further 15 per cent in 1951; after 1951 it was then reduced to the 1950 level, where it was kept until 1955, when the 1951 price was reintroduced. This meant that producers received about half the rise in the world price in the years 1949 to 1951, while the gain in 1954 went to the Government.39 In Argentina, the State Trading Agency (IAPI), which operated up to 1955, appropriated part of the gain from price rises in major agricultural products through a system of price differentials.

Continuation into a period of falling prices of high rates of duty that may be appropriate during a boom is likely to be burdensome and to damage export earnings. This danger can be avoided by adoption of a sliding scale which allows an automatic reduction of effective rates without the need for legislation. However, a sliding-scale system needs to be carefully designed and administered so as to prevent manipulation of the market.

For a successful stabilization program, it is clearly essential that the government should not increase its expenditures as rapidly as revenues rise during a boom or cut them as rapidly as revenues decline when prices fall. Such a policy requires determination and political strength as well as foresight. The accumulation of a fiscal surplus invites demands for higher expenditures and tax cuts, and deficit spending during a recession can easily be overdone. During a boom, a stabilization program conducted by a marketing board may be less exposed to political pressures than one which relies on taxation, because the marketing board’s surplus does not appear in the budget unless transferred to the state. In a period of falling prices, however, the marketing board may find it hard to cut its buying prices and may incur losses exceeding the surpluses previously accumulated.

Criticisms of Variable Export Taxes

Apart from the practical difficulties, two economic objections have been raised to the use of variable export duties for stabilization purposes. First, it has been suggested that domestic income will not in fact be stabilized because increases in export taxes will be quickly shifted to foreign consumers during a boom.40 This, however, seems implausible. In boom periods world prices are pulled up by strong external demand combined with an inelastic supply and will rise regardless of taxation. In these conditions, full forward shifting of additional export taxes is unlikely, even when the taxes are imposed by a large producer or by several countries simultaneously. If an attempt to stabilize the money income of the export sector were frustrated by short-run shifting of additional export taxes, this would mean that the primary producing countries had gained real income by successfully taxing foreign consumers.

A second economic objection is that attempts to stabilize income through variable export taxes or similar devices interfere with the maximization of a country’s export earnings.41 If there is any short-run price elasticity of supply, export volume will rise and fall with net prices received by producers and exporters. In the absence of export taxation, or with constant tax rates, the fluctuations in volume will tend to maximize the total value of exports. If, however, taxes are varied counter-cyclically, volume will be curtailed when prices are high and increased when prices are low. Earnings will fluctuate less, but on the average will be lower than they otherwise would be. Nurkse and others who have advanced this criticism conclude that income stabilization should be carried out by general taxation rather than by taxation of the export sector.

There is some merit in the criticism, but it seems to imply greater short-run supply elasticity than has been revealed by studies of particular commodities. Furthermore, the conclusion as to policy disregards the political and administrative obstacles to countercyclical variation of taxes other than those on exports (although Nurkse recognized that such difficulties exist). The policy of general taxation, if successfully applied, would have the paradoxical result that the disposable income of the nonexport sector would be reduced when the country’s terms of trade improved—and the export sector enjoyed prosperity—and vice versa.42 This result probably would not be considered equitable by many. Another objection to Nurkse’s recommendation is that it neglects the possibility of using variable export taxes to prevent long-run cycles of overproduction and underproduction.43

Export Taxes in Connection with a Currency Devaluation

A use of export taxes which is related to cyclical stabilization but which merits separate discussion is their imposition in connection with a currency devaluation. A devaluation, of course, increases the local currency proceeds of exporters unless the authorities take offsetting action. Generally, the increase in local currency receipts offers a stimulus to exports and thus helps to correct the disequilibrium in the balance of payments which brought on the devaluation. However, for commodities having little short-run elasticity of supply, the additional receipts of exports make no more than a small immediate contribution to the correction of the payments deficit. Indeed, the rise in exporters’ income tends to generate additional local-currency expenditures for imported goods which militate against the restraint of import volume that is necessary for the success of the devaluation.

If in these circumstances temporary taxes can be levied on exports with low short-run elasticity of supply, the state can obtain revenue which will help to control private expenditures and thus support the devaluation. By sharing in the windfall gains of exporters, the government may also make a devaluation politically more acceptable.

Only rarely, if ever, would it be advisable to levy temporary taxes high enough to absorb all of the increase in the local-currency price of exports. Even in the very short run there is usually some elasticity of supply, as noted above. It is important, moreover, that the temporary export taxes be reduced—or eliminated—as it becomes appropriate to allow further increases in the local-currency receipts of exporters. The speed with which the taxes are reduced should be related to the production cycle and the rapidity with which the volume of exports will respond to changes in prices. An early reduction is likely to be more desirable for taxes on annual crops than on, say, tree crops. Local-currency costs usually tend to increase after a devaluation, and an increase in the net local-currency price received by exporters will ordinarily be required even to maintain the volume of exports over time. A further increase is likely to be needed to stimulate exports.

The application of export taxes in connection with an official devaluation may be illustrated by the examples of Uruguay, Mexico, Greece, and India. Uruguay has a system of taxes on its basic exports—wool products, hides and skins, meat, oilseeds, and wheat—which are adjusted to reflect changes in the official parity of the peso and export prices. The Exchange Reform Law of 1959 authorized the Government to apply export taxes (retentions) up to a maximum of 50 per cent of the peso equivalent of the f.o.b. value of the exports; minimum rates were also established for wool products. Within these limits, actual rates might be changed at intervals of not less than 60 days, and adjustments were required if there was a variation of more than 5 per cent in the prices of the commodities or in the exchange rate. Except for meat, the levies were specific taxes on physical units exported.

After Uruguay devalued its peso in May 1963 (from Ur$11.00 = US$1 to Ur$16.40), it increased all export-tax rates, the effective rates thereafter ranging between 6 per cent and the maximum permissible rate. As a result of higher tax rates and export values, export-tax revenues rose by about 80 per cent between 1962 and 1963, but they declined as the country reduced its tax rates or abated them by subsidies in order to provide a greater incentive to exporters. Further devaluations occurred in 1964 and 1965, a major adjustment in the official rate being made in October 1965. Export-tax rates were raised considerably in October 1965, and most of the specific rates were then equivalent to 30–33 per cent of export values. Export-tax rates were again increased in May 1966 to absorb a large part of the additional peso receipts of exporters due to a further depreciation of the exchange rate.

Mexico successfully used export taxes after the devaluations of 1938, 1947, and 1954. The taxes were high immediately after the devaluations but were reduced as local costs rose, by cutting the tax rate; changing the official prices (aforos), which are the basis for the tax assessment; or granting subsidies. Total revenue from export duties amounted to 15 per cent of export value in 1955, but by 1962 had fallen to 6 per cent of value.44

Before Greece devalued the official parity of the drachma in 1953, it had granted various subsidies to exporters in order to compensate for overvaluation of the currency. After devaluation, however, these subsidies were repealed, and taxes were imposed on exports of basic commodities, such as cotton, rice, and olive oil, to absorb the windfall profits of producers and exporters and to prevent a steep decline in export prices in terms of foreign currencies.45

India imposed compensating export taxes in connection with its devaluation of the rupee from Rs 4.76=US$1 to Rs 7.50 on June 6,

1966. These included specific duties on tea, jute goods, and raw cotton, which amounted to 40 per cent of previous values. In addition, export duties ranging from 10 to 30 per cent of previous values were enacted on black pepper, oil cakes, coffee, mica, coir, hides, tobacco, and wool. All duties were calculated so as to leave a substantial margin over previous earnings. At the new exchange rate, the net rupee proceeds to the exporter of tea and jute goods would be about 18 per cent more than previously.

Administration and Equity

Export duties and marketing boards’ operations should be evaluated not only as an instrument of national economic policy but also as to ease of administration and equity.


Administrative convenience is perhaps the chief justification of export duties in the developing countries. They have proved effective in tapping the cash incomes of small farmers who could not be reached by income taxes owing to their lack of accounting records. Export taxes are also much simpler than land taxes.

The administrative advantages of export taxes are greatest where small producers predominate. Large plantations and big mining companies can be reached by income and profits taxes or by royalty requirements, if the taxing country is prepared to take the steps necessary to establish an efficient agency for assessment and collection, supplemented perhaps by the services of private auditing firms and expert consultants.

While smuggling may be a problem, particularly where heavy export taxes apply to commodities of high value relative to bulk, the correct classification and valuation of commodities legally exported is a more common difficulty. Valuation difficulties, of course, can be avoided by levying specific rather than ad valorem duties. In India, an official committee concluded in 1952 that valuation difficulties made it impracticable to replace the specific duty on tea exports by an ad valorem tax.46 Similar considerations have undoubtedly dictated the choice or continuation of specific duties in many other countries.

Specific duties, however, are generally regarded as less equitable than ad valorem taxes. Unless the rates are frequently changed, specific duties become more onerous when prices decline and less onerous when prices rise. Relative to value, and usually also relative to profitability, specific duties are heavier on the lower grades of an export commodity than on the higher grades. A specific tax is more likely to discourage production than an ad valorem tax yielding an equal amount. On the other hand, specific taxes have been supported as a means of improving the quality of exports, because they do penalize the lower grades and favor the higher ones.47

The rough equivalent of an ad valorem rate can be obtained by enacting a series of specific taxes, each to be effective when the market price is in a stated range. Finer gradations can be obtained by dispensing with brackets and stating the tax per unit as a certain percentage of the market price or posted price. This approach has the advantage of making unnecessary the determination of the actual value of particular shipments, but it usually cannot produce a close approximation to a true ad valorem tax because it does not allow adequately for price differences among grades. If an attempt is made to allow for such differences, a complex schedule must be introduced and quantities and grades of shipments must be carefully checked.

When the tax is linked to market prices, it is safer to use quotations on external organized markets than local prices. The latter may be subject to manipulation by large shippers in order to avoid tax. This is said to have occurred in Ceylon with respect to coconut oil.48 Several countries post fixed prices which serve as the basis for assessing tax. These are sometimes based on previous average prices or in other instances are arbitrarily set so as to modify effective tax rates.

A true ad valorem tax, assessed on the value of individual export shipments, is more refined than the approximations just described and is usually more difficult to administer effectively. However, if the surrender of foreign exchange is required, the tax authorities may obtain assistance by comparing customs declarations with documents submitted to the exchange control authorities. Where marketing boards exist, the assessment and collection of export duties is simple.


Export taxes are often criticized as inequitable because of their discriminatory nature and lack of close relationship to ability to pay. They are by nature discriminatory in that they do not apply to production for the home market and usually do not apply to all exports. Among producers of the export commodities subject to taxation, high-cost producers pay at the same rate as more efficient or better located producers. Small producers, who lack the capital to introduce improved production and marketing methods, may find the export taxes more burdensome than the larger and more efficient producers.

The imposition of export taxes does not necessarily burden the export sector more heavily than other sectors. The export sector may largely escape certain taxes that affect other sectors; this is especially likely if the taxable exports consist mainly of agricultural and forest products produced by peasants or other small operators, but may also be true if the products come from large plantations and mines. Also, producers for export may specially benefit from government expenditures for research, planting of improved trees, better transportation and marketing facilities, and the like.

In appraising the advisability of special taxation of the export sector and the fairness of export duties or marketing boards’ surpluses, the decisive points often relate to the availability of feasible alternatives. Where general income and profits taxes or land taxes can be effectively applied to the export sector, special taxation may be unnecessary or inappropriate on a continuing basis. As a means of capturing windfall profits in a boom and thus contributing to a stabilization policy, a well-administered excess profits tax might be fairer than sliding-scale export duties. Generally, however, where export duties are important, the more refined taxes on income, profits, or land values are not realistic alternatives for the present or near future. The modern direct taxes commonly are limited in scope and unequally and incompletely applied, especially in the agricultural sector. Most countries find it necessary to use a variety of excises, stamp taxes, and other impersonal taxes that do not conform to the highest standards of equity; an exacting critic may find export taxes less arbitrary than some of the traditional indirect taxes.


As regular revenue sources, export duties and marketing boards’ surpluses are likely to remain important in a number of primary producing countries for some time to come, and to play a minor role in a larger group of countries. Their administrative simplicity and political acceptability will often outweigh criticisms of the taxes in an environment in which revenue demands are strong.

In the long run, however, export taxes probably will diminish in fiscal importance in Africa, Asia, and Latin America, as they did earlier in Europe. Economic development and administrative and political factors can be expected to work in this direction. Since export duties are seldom applied to manufactured goods, these taxes will decline in countries that change from exporting primary products to exporting manufactures. The development of greater capacity to administer taxes on domestic trade and on income and wealth will offer alternatives to export and import taxes at the same time that growing government expenditures and political integration make internal taxes more acceptable.

An important question for tax policy relates to the emphasis that should be placed on accelerating the replacement of export taxes by other measures. In this context it should be recognized that heavy taxation of exports involves economic risks for the taxing country and possible damage to other countries. If production and exportation of the taxed commodities are discouraged, international trade may be curtailed or distorted with a consequent loss of comparative advantage in production and an additional cost to consumers. These harmful effects are more likely to occur when the export taxes represent a differential burden on exports rather than a substitute for other taxes that strike mainly the nonexport sectors. Export taxes, of course, are not alone in interfering with specialization and international trade; import taxes have similar effects. Indeed, leaving aside theoretical refinements, this common characteristic of export taxes and import taxes appears to represent the main policy implication of the proposition that the two kinds of tax are equivalent in certain circumstances, a generalization which has aroused interest in economic literature49 but which is too subtle to have attracted wide attention.

In appraising the economic considerations, immediate revenue requirements and the difficulties and imperfections of alternative taxes should not be overlooked. No country, in practice, confines itself to taxes that meet the highest attainable standards of equity and economic policy. Improvement is obtained by increasing the proportion of revenue raised from the taxes which accord best with these standards and which can be administered at reasonable cost to the government and taxpayers.

If viewed pragmatically, replacement of export taxes will be assigned a lower priority than if viewed idealistically. Also, wide differences among countries will be recognized. Nevertheless, the gradual substitution of other taxes for export taxes seems a desirable goal in view of the discriminatory character of special export taxes and the importance of removing handicaps to the exports of the primary producing countries.

The objections to export duties apply to their use as continuing sources of general revenue and not to their use in financing special services or facilities for the benefit of producers or exporters of the taxed commodities. Moreover, the criticisms of export taxes apply less forcefully to their temporary imposition for stabilization purposes or as a means of absorbing windfall profits associated with a currency devaluation. The strongest case for a prolonged use of export taxes is in support of an international commodity agreement that involves the deliberate limitation of exports.

A possible means of transition from export taxes to other taxes would be to treat the export tax as an advance payment of income or profits tax, as in Peru, or of land tax. This technique might be suitable for mines or large-scale agriculture, but does not seem feasible for small farmers.

In many primary producing countries the immediate concern will be the adaptation of export taxes to changing conditions and their improvement rather than their replacement. It is particularly important for governments to pay close attention to trends in prices and costs and to be prepared to reduce export taxes when unfavorable cost-price relations seriously threaten the volume of exports.

The substitution of ad valorem duties for specific export duties—or the approximation of this change by the adoption of a series of specific duties keyed to prices—appears to be an improvement that should be practicable for many commodities. Admittedly, ad valorem duties are more complex than specific duties, but they are far simpler than income and profits taxes or land taxes.

Where they have been established for other purposes, marketing boards have proved to be a convenient instrument for the collection of export taxes. The creation of a marketing board primarily for the purpose of raising revenue, however, would involve the unnecessary assumption of responsibilities and the risk that losses will be incurred as the result of falling prices.

APPENDIX: Description of Export Taxes in Selected Countries

This appendix briefly describes the export taxes and marketing board operations in the principal agricultural-commodity export countries after the Korean war. Attention is focused on the major tax policy and revenue changes, where data are available.

Asian Countries

Ceylon: Sliding-scale duties

Tea, rubber, and coconut products—representing 92 per cent of Ceylon’s total exports in 1963—are subject to export duties. There is also a tax on crude glycerin, and in 1964/65 an export duty of 5 per cent was introduced on the value of precious stones. In 1965 about 25 per cent of Ceylon’s GNP came from exports, and 21.3 per cent of its total tax revenue from export duties, of which tea and rubber accounted for 70 per cent.

In order to absorb part of the gains being realized by producers during the Korean war boom,50 Ceylon introduced a sliding-scale rate system in 1951 for export duties on its major export products—tea, rubber, and coconut products. The main features of the system were:

(1) The duty was calculated on the basis of f.o.b. value.

(2) Below a certain level of estimated f.o.b. prices, the duty was specific.

(3) Above this, the rates were graduated with slabs of estimated f.o.b. prices.

(4) The estimated f.o.b. value was equal to the average Colombo market price of the product in the second preceding week, plus the normal f.o.b. expenses and cesses payable before actual shipment, plus the export duty actually prevailing in the second preceding week.

(5) Rates on other coconut products were linked to the duty on copra at stated percentages of the latter.

Under the sliding-scale system, the exporters had the option of registering export of the commodity when prices and duties were economically advantageous to them. Large shippers, especially of coconut oil, were reported to be able to influence the market two weeks before an expected heavy shipment so as to render the sliding scale ineffective. Further, the shippers had the option of reporting within a period of three months after registration (six months for rubber).51 This system made it increasingly difficult for the Government to check evasion and administer the tax effectively. In view of the administrative difficulties and declining prices, the sliding-scale system was abolished for tea and coconut products in December 1953, and for rubber in May 1956. Because of the low level to which rubber prices dropped, the duty on that commodity had remained specific at the basic rate. The rates fixed in 1953 on coconut products remained unchanged until March 1955, when, because of a substantial fall in the market prices of coconut products, they were reduced.

On January 7, 1963 a sliding scale for duties on exports of copra, coconut oil, desiccated coconut, and fresh nuts was reimposed. Duties were based on the average London c.i.f. prices of Straits (i.e., Singapore) coconut oil, as estimated weekly by the Principal Collector of Customs. A new sliding scale for rubber was adopted on November 26/27, 1961.

The specific rate on tea introduced in 1953 has been revised several times. In 1959 a two-tier system was adopted, with a specific rate of Cey Rs 35 per 100 pounds; also, tea sold in the Colombo auctions was taxed at 50 per cent on the amount of the price exceeding Cey Rs 1.85 per pound, with the maximum tax fixed at Cey Rs 70 per 100 pounds. In addition, tea has to bear cesses for replanting and rehabilitation, medical aid, research, tea control, and promotion, which, added to the basic rate of Cey Rs 35 per 100 pounds, make a total burden of Cey Rs 42.50 per 100 pounds. A concessionary specific rate of Cey Rs 33 per 100 pounds was introduced, with effect from April 10, 1963, on tea sold at Colombo auctions and stored at Colombo, and thereafter exported through the ports of Galle and Trincomalee.

Effective export-tax rates on tea, Ceylon’s largest export crop, rose from a level of 17–21 per cent of sales in 1950–54 to a peak of 25 per cent in 1955, but declined to 19 per cent in the early 1960’s (Table 3).

Table 3.

Ceylon: Export Duties and Special Cesses on Tea, 1950-63

(In millions of Ceylon rupees)

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Sources: Administration Report on the Customs and Shipping for 1951-1962/63; tea tax revenue from Accounts of the Government of Ceylon.

Including tea tax, 1959-63.

Fiscal years ended September 30.

The two-tier system of taxing tea exports did not work efficiently, and it is believed to have resulted in a substantial loss of foreign exchange and revenue. Apart from deliberate attempts to evade tax by exporting quality tea on lower grade samples, the duty structure is alleged to have stimulated quantity production at the sacrifice of quality.52 The Finance Minister, in his budget speech for 1964/65, expressed the view that the scheme of duties ought to be such as to encourage quality at the expense of quantity, if necessary. He proposed that the specific export duty continue to be levied at a fixed rate of Cey Rs 35 per 100 pounds on all teas; teas not sold at Colombo auctions but shipped for sale at the London auctions would pay an extra Cey Rs 10 per 100 pounds. He further proposed that the ad valorem duty be replaced by an acreage tax leviable on all estates over 100 acres, at rates differentiated according to the quality of tea grown. These recommended changes, however, were not adopted.

India: Slab system

Merchandise exports formed about 4 per cent of India’s gross domestic product (GDP) in 1962/63. Export duties are imposed mainly on raw jute, raw cotton and cotton waste, mica, coffee, coir, and lac. However, the duties accounted for only 0.5 per cent of the total tax revenue of the central and state governments in 1962/63. In this year, export duties on tea accounted for about 70 per cent of the total export-tax revenues.

An export duty on tea was imposed at a specific rate in 1947. The rate was raised several times in the following years. From March 1, 1955, a slab system, depending on the value of tea in foreign markets, was introduced. The rate structure included five slabs, the tax rising from 4 annas (Rs 0.25, or about 5 U.S. cents) per pound at a price up to Rs 2½ per pound, to 12 annas when the price exceeded Rs 4% per pound. Thus the effective rate rose from 10 per cent of value at the top of the first slab to almost 16 per cent at the bottom of the fifth slab; within each slab the tax was fixed and the effective rate decreased slightly as the price moved from the bottom to the top of the slab. For purposes of the duty, the authorities posted the average price of tea each month, calculated as the weighted average price of all Indian teas sold at the London auctions in the immediately preceding month.

The duty on tea continued under this system until 1957, when the rate schedule was modified. The export duty on tea, abolished on March 1, 1963, was reinstated at the time of the devaluation in June 1966. It is now levied at a specific rate.53

Malaya (since 1963, Malaysia)

Exports account for about 41 per cent of Malaysia’s GNP (1963), and export duties are an important source of government revenue. These are levied on a large number of products: in the Federation of Malaya, on copra, oil palm nuts, rubber, bauxite, iron ores, tin, rubber planting materials, palm oil, and other items; and in Sabah and Sarawak, on birds’ nests, coffee, cocoa, fish, forest products, rubber, and copra. Export duties on rubber and tin alone made up about four fifths of Malaysia’s total export-duty revenue in 1964.

Before February 1947, the rates of export duty on rubber had been, at times, on a sliding scale as well as specific. (A cess, at ¼ cent per pound, was credited to the Rubber Fund for research purposes.) During 1947–50 the rate was fixed at a flat 5 per cent ad valorem. At the beginning of 1951, this tax was replaced by a progressive ad valorem structure (Schedule I duty) incorporating rates above 5 per cent when the price of rubber exceeded 60 cents per pound. A Schedule II duty was introduced on the price above 60 cents per pound to support a government program for replanting rubber trees, and the research cess (Schedule III duty) was increased. In 1952 a Schedule IV duty on the price above 75 cents per pound was instituted.

Between 1950 and 1951, Malaya’s export duties on rubber doubled from 5.4 per cent to 11.0 per cent of export sales; they reached a peak rate of about 19 per cent in 1955 and then declined to 11 per cent in 1958 (Table 4). After rising to almost 18 per cent in 1960, the effective tax rate then dropped to about 13 per cent in 1963.

Table 4.

Malaysia: Export Duties and Special Cesses on Rubber, 1950-63

(In millions of Malayan dollars)

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Sources: Revenue, Federation of Malaya, Report of the Customs and Excise Department (title varies); exports for 1950-61, Department of Statistics, Monthly Statistical Bulletin of the Federation of Malaya, and for 1962-63, United Nations, Yearbook of International Trade Statistics.

Includes duties paid to Sundry Funds.

In 1955, following the Report of the Commission of Enquiry into the Rubber Industry of Malaya (1954), the minimum 5 per cent rate was reduced to 4 per cent, and the sliding-scale rates were readjusted.54 A new anti-inflationary cess to apply when prices exceed M$l per pound was also introduced. Thus, in addition to the export duty and the anti-inflationary cess (which vary according to price), a research cess at % Malayan cent and a replanting cess at 4½ Malayan cents per pound are payable at present (1966). Table 5 gives the amount of total tax at various prices of rubber per pound.55

Table 5.

Federation of Malaya: Duty on Rubber

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Indonesia initially, in March 1950, employed the device of a differential exchange rate through the use of export certificates to capture windfall profits arising from depreciation of the rupiah.56 The export rate was held one third below the import rate, the difference being realized by the Government as an export tax. This system yielded substantial revenues during the Korean war boom, but was discontinued in February 1952, when concern was felt over its disincentive effects on the export industries. It was then replaced by a basic duty of 8 per cent, supplemented by special rates ranging from 15 per cent to 25 per cent of the value of “medium strong” and “strong” exports. With the weakening of export markets after 1952, the export duties were gradually abandoned or lowered, and in October 1955, rupiah premiums of 5–10 percent were allowed for several export products.

In June 1957 the Government instituted a general export certificate plan, under which certificates issued for the amount of export sales were to be used by importers in order to obtain foreign exchange. The sale of these certificates to importers greatly augmented the proceeds to exporters; at the same time, however, all other export taxes were replaced by a 20 per cent tax on the sale of the certificates. This tax was later reduced to 10 percent and was repealed in May 1963. Subsequently the equivalent of differential taxation of major categories of exports was attained through multiple exchange rates. The exchange system has been modified several times in recent years, and effective rates of exchange (and implicit taxation) for particular export commodities have varied widely.


Thailand and Burma are the largest exporters of rice. Thailand has experimented with three major approaches to the taxation of rice exports,57 and Burma has long controlled the supply of rice through a marketing board.58 During World War II the Government of Thailand established a marketing agency; this marketing board mechanism was retained after the end of the war because of its usefulness in collecting revenues and controlling supplies. Rice could be purchased at a fixed differential below the export price, but since shippers procured their rice directly from the millers, this was merely a paper transaction. Actually, most rice was exported directly by the Government of Thailand to other governments.

A multiple exchange rate system was instituted in Thailand in 1947 and continued until 1954. At that time a single fluctuating rate was adopted, and the government rice export monopoly was replaced by a private export system, with sales subject to various taxes on milling and on export. Export-tax rates range from 3.2 per cent (on white and cargo meal) to 7 per cent on paddy; white broken rice is taxed at 4.4 per cent. These rates are applied to prices fixed from time to time by the Director General of Customs, based on average market prices. At the same time the Minister of Economic Affairs was given the authority to impose “premiums” on the export of rice in order to ensure an adequate domestic supply of rice at reasonable prices. When the supply is low and prices high, the premium is raised to discourage exports. In reality, the “premiums” are flexible export taxes, which typically contribute substantially more revenues to the Government than the formal export duties. In 1964/65, for example, rice export premiums amounted to B 1,249 million, against B 380 million for export duties, and provided 11.2 per cent of total government revenues.

Thailand also realizes appreciable revenue from the export of rubber and teak. Duties on rubber are graduated with the price, according to a slab system, ranging from 5 per cent when prices do not exceed B 5 per kilogram, to 20 per cent when they exceed B 20. Teak and other woods are taxed at 10 per cent. Taxes on exports of rubber and wood account for about 15 per cent of total export taxes and premiums.

Other countries

Australia imposes a charge on exported wheat and on wheat products in order to maintain a wheat price stabilization fund, from which payments are made to the growers to assure them of a guaranteed average export price.59 Export charges are also levied on exports of various other primary products, e.g., fruits, dairy produce, eggs, meat, and wine, with a view to defraying the expenses of export boards established to control the quantity and quality of exports of such products.

In the 1963/64 budget, the Philippines proposed to levy a 10 per cent ad valorem tax on its major export items—including sugar, copra, coconut oil, and desiccated coconut—for five years. Although the proposal never became law, the effect of a 10 per cent tax was obtained for a time by a compulsory surrender requirement which produced the equivalent of an exchange rate of P 3.51= US$1 for major exports, compared with a free market (buying) rate of P 3.89. This requirement was repealed in November 1965.

Pakistan imposes export duties on jute, cotton, wool, and tea. During 1959–61 the first three items accounted for 58 per cent of total exports. Because of alleged adverse effects on growers, the 1964/65 budget reduced the duty on cotton and jute by 50 per cent.

African Countries


Nigeria’s export duties, first imposed in 1916, are an important source of government revenue, all of which is now allocated to the regional governments. In addition, major export crops—cocoa, groundnuts, palm kernels, palm oil, and cotton—are sold through marketing boards, part of whose surpluses is transferred to the Government. Until 1951, export duties were levied as specific taxes, whose rate equaled about 4–5 per cent of value in the interwar period. On December 31, 1950, duties on major crops were shifted to an ad valorem basis, at a 6 per cent rate; they were increased to a basic rate of 10 per cent in March 1951, with the rate increasing by per cent for every £ 1 of value above a stipulated minimum price.60 In August 1954 a maximum effective rate of 20 per cent was established. Until 1962 the duties on cocoa were the most important source of revenue; thereafter they were exceeded by the duties on groundnuts and groundnut oil. Other exports taxed include palm products, cotton, hides and skins, and rubber.

Export taxes on cocoa, which took only 2–5 per cent of sales before the Korean war, jumped to 15 per cent in 1950/51, and by 1953/54 absorbed one third of export sales (Table 6). Following the 20 per cent ceiling enacted late in 1954 and the decline in cocoa prices, the effective tax rate leveled off and finally dropped to 12.6 per cent in 1961/62. An entirely different pattern emerges when the marketing board’s trading surplus is combined with the export duty. Because of the large gross profit margin retained by the marketing board in 1947/48, a greater proportion of export proceeds was absorbed (68 percent) than in any other year. The total tax and the marketing board’s surplus fluctuated between 0.5 per cent and 52 per cent of export proceeds over the period 1948/49-1961/62.

Table 6.

Nigeria: Export Duties and Marketing Boards’ Surpluses for Principal Exports, 1947/48-1961/62 1

(In per cent of net export proceeds)2

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Source: Gerald K. Helleiner, “The Fiscal Role of the Marketing Boards in Nigerian Economic Development, 1947-61,” The Economic Journal, Vol. LXXIV (1964), pp. 582-605.

Year ended March 31.

Includes estimated amount of produce purchase tax.

Export proceeds less net marketing boards’ trading expenses plus increase in stocks. (Minus sign indicates deficit.)

Through 1953/54, statistics refer to all Nigeria (plus Southern Cameroons); from 1954/55 on, they refer only to the Western Region.

Through 1953/54, figures include all Nigeria; from 1954/55 on, they refer only to the Northern Region. The 1947/48 and 1948/49 figures refer to Nigerian operations of the West African Produce Control Board. Export duties for 1955/56 and later years include duties on groundnut oil.

Through 1953/54, statistics refer to all Nigeria (plus Southern Cameroons); from then on, they refer only to the Eastern and Western Regions, except for export duties.

Through 1953/54 (through 1956/57 for export duties), statistics refer to all Nigeria; from then on, only to the Eastern Region.

Through 1953/54, statistics refer to all of Nigeria; from then on, they refer only to the Northern Region, except for export duties.

In contrast, the effective rates on groundnuts, palm kernels, and palm oil remained fairly constant between 1950/51 and 1960/61, after the 1950/51 and 1951/52 increases, reflecting greater price stability of these commodities. The rates ranged between 10 and 14 per cent, with an apparent upward trend during the period except that the rate on groundnuts rose to a maximum of 16.6 per cent in 1954/55 and then leveled off to slightly over 13 per cent. However, trading surpluses or deficits of the marketing boards introduced a significant variable. As a result of these fluctuations, the Government and marketing boards absorbed deficits of 1.2 per cent of the net export proceeds for groundnuts, 4.8 per cent for cotton, and up to 30.9 per cent for palm oil. Export duties plus marketing boards’ surpluses, as a percentage of net export proceeds, reached 61.1 per cent for cotton, 59.4 per cent for groundnuts, 44.7 per cent for palm oil, and 43.4 per cent for palm kernels.


The Gold Coast (later Ghana) first levied an export duty on cocoa in 1916, at l/4d. per pound, to finance railway construction.61 The duty on cocoa is currently levied according to a sliding scale linked with the world price of cocoa. The rate up to an f.o.b. price of €G 120 62 per ton is 10 per cent of the price (with a minimum duty of €G 10 per ton); for export prices in the range of €G 120–260 per ton, the rate is one half of the difference between the actual price and €G 100 per ton. When the price exceeds €G 260 per ton, the duty is equal to the difference between the actual price per ton and €G 180, thus producing a 100 per cent marginal rate.

All exports of cocoa are marketed by the Cocoa Marketing Board, which was established in 1947. For many years, producers’ prices were set below world cocoa prices with the result that until 1960/61 a surplus was realized in every year except 1956/57.

Export duties on cocoa, by far Ghana’s most important export crop, rose from about 8 per cent of the marketing board’s sales in 1949/50 to a peak of about 50 per cent in 1954/55 (Table 7). They then started to decrease, and, after an increase in 1957/58, they dropped to less than half of this rate. Export taxes on cocoa thus were much heavier than in Nigeria, especially during the earlier period. On balance, the Ghana Marketing Board retained only a slightly higher percentage of sales than the Nigerian Marketing Board did during this period; so the combined weight of tax and the marketing board’s surplus on exports in Ghana was somewhat higher than in Nigeria.

Table 7.

Ghana: Export Duty and Marketing Board’s Surplus for Cocoa, 1949/50-1962/63 1

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Sources: For 1949/50-1960/61, Ghana Cocoa Marketing Board, Annual Report and Accounts; for 1961/62-1962/63, 1965 budget. Export-duty revenues from marketing board reports differ from annual figures in financial statements; the differences, however, net out over a period of years.

Crop years ended September 30.

Includes local duties; also includes farmers’ voluntary contributions, in the fiscal year ended June 30, of €G 5.6 million in 1959/60, and €G 11.0 million in 1960/61 (1965 budget).

Minus sign indicates deficit.


Cotton and coffee account for more than 80 per cent of Uganda’s export earnings. Both have long been subject to marketing board control and to export taxation.63 Coffee and cotton marketing boards were established during World War II to organize the purchase of these crops from growers and the export of the commodities. After World War II, the Lint and Coffee Marketing Boards realized substantial surpluses, which were credited to price assistance funds or transferred to the central government for budget support.

In addition, the Government imposed sliding-scale export taxes on coffee and cotton. Robusta coffee was not taxable if the price was less than £.120 per ton; for each £3 above this price, a tax of £1 was imposed. The tax on cotton became applicable at a relatively lower price level—50 cents per pound—and increased by 1 cent to 3 cents for every 10-cent increase in price until a price of 120 cents was reached, when the duty became 13 cents per pound. Above this, the duty was increased by 2 cents for each 10-cent increase in price.

These rate scales were believed to discriminate against cotton production. In 1960, for example, coffee and cotton growers had about the same gross income, but cotton growers paid more than four times as much tax as coffee growers. Subsequently, the lower price limit for coffee was reduced to £90 per ton.

During 1960-63, not only did Uganda’s coffee export-tax revenues decline, but the marketing board operated at a deficit (Table 8). Between 1956 and 1963, export taxes amounted to about £12.1 million, against the marketing board’s deficits of £5.6 million. As a result, the total burden on coffee growers declined from an average of about 21 per cent of export sales during 1956–59 to a net subsidy averaging 11.5 per cent during 1960-63.

Table 8.

Uganda: Export Taxes and Marketing Boards’ Surplus for Coffee and Cotton, 1956-631

(In millions of Uganda pounds)

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Source: Uganda, Ministry of Planning and Community Development, Statistical Abstract, 1961 and 1964, Uganda.

Year ended October 31.

Minus sign indicates deficit.

Gross deficit.

The net contribution of the cotton industry to the Government was much greater. Over the period 1956-63, export taxes amounted to approximately £18.5 million, against the marketing board’s deficit of £3.1 million. The net burden on cotton growers increased from an average of 13.8 per cent of export sales in the earlier period to 20.0 per cent in 1960-63.

The Sudan

The Sudan has long realized substantial revenues from the taxation of a large variety of exports, the most important being cotton. In addition to a general rate of 3 per cent on the value of exports of all goods produced in the Sudan, separate ad valorem duties are levied on cotton seeds (15 per cent), groundnuts (5 per cent), sesame seeds (5 per cent), hides and skins (5 per cent), melon seeds (20 per cent), manganese ore (5 per cent), and wet salted fish (20 per cent). Also, specific duties are assessed on cattle and sheep, ivory, and gum. Cotton is subject to a specific duty which varies with the type of lint.64

Cotton dominates the economy; it provides about 60 per cent of export earnings and, directly and indirectly, about 40 per cent of total revenues. A substantial part of this revenue is derived from state participation in the Gezira Scheme, frequently mistaken for a marketing board. The Gezira Scheme produces over 60 per cent of all cotton in the Sudan on about 1.8 million acres of land between the White Nile and the Blue Nile. The Gezira Board is responsible for developing the farms, providing seeds and fertilizer, and undertaking pest control; the Government provides irrigation; and tenants operate the farms. The net proceeds are divided among the three parties: 42 per cent to the Government; 50 per cent to the tenants; and the remainder to the Board for operating costs, the tenants’ reserve fund, social development projects, and local government councils. In 1963/64, the LSd 7.6 million allocated to the Government represented about 10 per cent of its total revenue. This sum, though considerably less than the LSd 13.2 million allocated in 1962/63, is more than the LSd 4.3 million proceeds expected in 1964/65 because of poor crops.

Other countries

Export taxes are also levied in other African countries. In French-speaking countries, exports typically are subject to special export duties as well as a general turnover tax. In Ivory Coast, coffee is subject to an ad valorem rate of 22.32 per cent, and bananas to a rate of 12 per cent. Mali levies an export duty of 11 per cent on cotton, 8 per cent on cattle, and 3 per cent on groundnuts. Malagasy Republic taxes exports of meat, ginger, tapioca, tobacco, and precious stones. Cameroon has taxes on exports of cocoa, coffee, bananas, cotton, livestock, and raw hides; Burundi on coffee. In former British territories, Sierra Leone taxes diamonds. Togo taxes cocoa, coffee, palm nuts, copper, cotton, groundnuts, and phosphate. In December 1962, Tanganyika (now Tanzania) enacted a tax on exports of sisal; this was based on a sliding scale which varied with the price of sisal, and now ranges from £ 3 per ton on the f.o.b. value between £74 to £75 per ton, to £11 per ton on a value of sisal exceeding £105 per ton plus £1 for every £ 1 by which the value exceeds £ 105, i.e., 100 per cent rate. Tanzania also has export taxes on coffee, beeswax, hides, spices, and tea.

Latin American Countries

El Salvador

El Salvador first imposed export taxes in 1900, on sugar, balsam, hides and skins, indigo, leather, leaf tobacco, rubber, horns, and bones. Since 1934, coffee, gold, silver, and scrap metals have been added to the list of taxable exports.

From 1934 to 1942 the export duty on coffee was specific and varied from year to year, depending on crop and market conditions. In 1943, a new system of taxing coffee was devised in order “to achieve a more equitable system of taxation.” The new law provided for a schedule of rates graduated with the New York spot quotation for Santos No. 4 (Brazilian) coffee that prevailed every October. The price for Santos No. 4 coffee was selected because it was regularly quoted in the New York market and because it was not subject to control by the Salvadoran producers. These rates ranged from ¢ 0.13 per quintal (46 kilos) when the price was between $9.00 and $9.24 per quintal, to C 5.19 when the price was over $15.75. The law also provided that the Ministry of Finance could raise or reduce the duty from that provided for in the schedule, depending on the difference between the New York spot quotations and the prices actually paid for coffee in El Salvador. During 1943 and 1949 the tax ranged from C 1.20 to C 5.19, the top schedular level for the crop year 1946/47. But because of the continued rise in the New York quotation, the duty was set at C 7.00 in 1947, beyond the previous maximum schedular rate.

On September 1, 1950 a decree established a new progressive rate on the f.o.b. value of coffee exports; this rate is still in effect (Table 9).

Table 9.

El Salvador: Progressive Rate of Export Tax on F.O.B. Price of Coffee, in Effect Since September 1, 1950

(Per quintal)

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The 1950 law also exempts from tax, income received from the cultivation, production, and exportation of coffee. However, in 1960 a decree limited the exemption to profits realized from the cultivation and production of coffee.

Argentina: Export retentions

From 1862 to 1923, Argentina’s export tax was based on the difference between the prices paid for exports and prices fixed by law. The intention was to mop up excess profits from the export trade.65 Multiple exchange rates, which had the effect of taxing exports, were introduced in 1939 and lasted for 20 years.

Since 1955, export taxation has taken the form of “export retentions,” which are taxes calculated on aforos fixed by the Advisory Commission on Export Values on the basis of f.o.b. sales value. Rates on the principal exports have ranged from 5 to 25 per cent (Table 10). The export tax must be paid before shipment of merchandise or within 30 days when there is a bank guarantee for payment. The burden of the retention taxes is mitigated by the return of all surcharges, customs, and other duties paid on imports of raw materials used in the exported articles and by rebates of 6, 12, and 18 per cent, according to the degree of manufacture, based on the value of exports. These rebates are available only to the “nontraditional” exports.

Table 10.

Argentina: Rates of Export Retention, 1955-65

(In per cent)

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Wheat, until June 15; corn, 6.5 per cent; other cereals are subject to 3.5 per cent.

Beef and tongues.

In addition to the export retentions, other taxes are levied as follows: 10 per cent sales tax on exports of linseed oil, oilseeds, logs, coal, certain wood extracts, and raw hides and wool; 1.5 per cent tax on exports of agricultural and livestock products, the proceeds of which go to the National Agricultural and Livestock Fund; a 1 per cent tax on exports subject to retentions for the financing of road construction in connection with agricultural development; a 1 per cent tax on certain agricultural products for the National Grain Board; a 1.5 per cent tax on certain other agricultural products, the proceeds of which are allocated to the Secretariat of Public Works; a 0.3 per cent statistical tax on exports subject to retentions; and finally, a 5 per cent tax on tanning extracts allocated to the Forestry Fund.


On April 30, 1927, Ecuador’s Organic Law of Customs imposed specific taxes on the exports of cacao, hides, paja toquilla (straw), and tagua nuts (vegetable ivory). Amendments to the 1927 law expanded the list of dutiable exports and raised the specific rates.

On January 1, 1954 a new schedule of customs duties was placed in effect. For the first time, exports of bananas, coffee, and shrimp were made subject to tax. Since then, additional rates for specific purposes have been levied. A long-standing characteristic of the Ecuadoran export tax has been the multiplicity of the export taxes and the earmarking of their proceeds for specific purposes. Export taxes were also levied and collected by certain municipalities, provinces, and decentralized agencies. In August 1964, all export taxes on bananas, cacao, and coffee were unified, greatly simplifying the structure.

Bananas account for about 60 per cent of Ecuador’s exports, and about 75 per cent of export-tax revenues. In 1964, a single ad valorem rate of 21.4 per cent, based on f.o.b. values, was established, replacing 25 different specific and ad valorem duties levied by the national and municipal governments and decentralized agencies.

Coffee accounts for about 15 per cent of the value of total exports. Like bananas, coffee was subject to many different export taxes before August 1964. Thereafter, a single rate of 9.4 per cent was imposed on washed coffee (f.o.b. price) and a 9.6 per cent rate on natural coffee.

Cacao is the third most important export product of Ecuador. The decree of August 1964 introduced a single ad valorem rate of 9.2 per cent based on f.o.b. values.

Other countries

Costa Rica imposes export taxes on bananas (US$0.02 per stem) and fish (US$2.00 to $5.50 per metric ton) and an ad valorem tax of 2 per cent on shrimp. The tax on coffee (Law 2802 of September 1, 1961) is a sliding-scale rate based on the average price per quintal. If the average price is below US$35.00, there is no tax; if it is between US$35.00 and US$37.50, the tax is 2.5 per cent of the total value; if it is between US$37.50 and US$40.00, the tax is 5 per cent; and if it is between US$40.00 and US$42.50, the tax is 7.5 per cent. At a price above US$42.50, the tax is 10 per cent of the total value.

Export duties on coffee are important in Guatemala. The export tax on coffee (Decree of Congress No. 1549, January 10, 1962) is a sliding-scale rate based on the f.o.b. price per quintal. The tax is 10 per cent on the value if the price is less than Q 20; if it is between Q 20 and Q 25, the rate is 12 per cent; between Q 25 and Q30, 15 per cent; and between Q 30 and Q 35, 20 per cent. At a price above Q 35 the tax is 30 per cent of the value. Guatemala also imposes a tax on exports of essential oils which is based on their f.o.b. value in excess of a minimum price; for example, it is 10 per cent on any amount above 60 centavos per pound of citronella oil, and 10 per cent on the value of lemon tea above 80 centavos per pound. Cotton is taxed at a fixed amount of Q 0.20 per quintal.

Uruguay has a retention system which provides for flexible rates varying with the local currency receipts. (For a description, see above, pp. 475-76.)

Brazil imposes the equivalent of a substantial export tax on coffee through a requirement that exporters surrender without compensation a portion of their foreign exchange receipts. The cruzeiro equivalent of this portion of receipts is transferred to the Coffee Defense Fund administered by the Brazilian Coffee Institute, and is used to purchase and stockpile surplus coffee and to carry out a program for the elimination of coffee trees and for substitution of other crops. In December 1965, exports of high-quality coffee were subject to the equivalent of a tax of almost 60 per cent of the world price.

Colombia imposes a retention tax on coffee exports, equivalent to 16 per cent ad valorem (late 1965), for the purpose of financing the National Coffee Fund. This Fund finances stockpiling and certain marketing activities of the National Coffee Federation. Coffee exports are also subject to an unfavorable exchange rate (as of September 30, 1965, Col$8.50=US$l, compared with a free market rate of Col$18.15).

Rôle des taxes d’exportation dans les pays en voie de développement


Les taxes d’exportation sont perçues principalement sur les produits agricoles et les produits miniers dans les pays moins développés de production primaire. Bien qu’actuellement ces droits soient en général moins élevés que lors de la période de prospérité que connurent certains pays pendant la guerre de Corée, ils n’en représented pas moins, avec les excédents des organismes publics de commercialisation, une fraction non négligeable des recettes fiscales totales d’un certain nombre de pays.

Sauf de rares exceptions, la charge de la taxe d’exportation est supportée principalement par les producteurs et les exportateurs du pays qui perçoit cette taxe, plutôt que par les consommateurs étrangers. Les statistiques dont on dispose indiquent que les taxes permanentes d’exportation réduisent, en général, le volume des exportations ou retardent son expansion. Cet inconvenient peut, cependant, ne pas constituer une objection décisive à l’égard de ces taxes, étant donné que la perte de recettes d’exportations peut être faible et que les impôts qui remplaceraient ces taxes pourraient eux aussi comporter des effets défavorables.

Les taxes d’exportation à taux variable peuvent servir à atténuer l’instabilité provoquée par les fluctuations des prix d’exportation, mais leur efficacité dans ce domaine exige une adaptation rapide aux changements du marché ainsi qu’un contrôle minutieux des dépenses publiques. Des taxes temporaires d’exportation ont parfois été institutes à l’occasion d’une devaluation monétaire pour absorber les bénéfices exceptionnels. ll conviendrait de réduire —ou de supprimer —ces taxes au fur et à mesure que les augmentations des recettes en monnaie locale revenant aux exportateurs deviennent sufficantes et nécessaires pour les inciter à maintenir et même augmenter le volume des exportations.

La principale justification des taxes d’exportation réside dans le fait qu’elles constituent un instrument administratif pratique pour procurer à l’Etat une source permanente de recettes. Ces taxes permettent en particulier d’atteindre les petits exploitants agricoles dans les pays qui ne disposent pas d’une administration fiscale efficace sur le plan intérieur. Si les taxes d’exportation semblent ne pas être d’une très grande équité ni d’une très grande efficience économique, elles peuvent en tout cas soutenir favorablement la comparaison avec les autres moyens auxquels l’Etat pourrait avoir immédiatement recours. En définitive, léimportance des taxes d’exportation diminuera probablement au fur et à mesure de l’amélioration du système fiscal et du développement économique des pays où ces taxes sont en vigueur.

Función de los derechos de exportatión en los países en desarrollo


Los países de productión primaria menos desarrollados suelen imponer derechos de exportatión principalmente sobre los productos agrícolas o mineros. Aunque en la actualidad la importancia de esos derechos es por lo general menor de lo que fuera durante el auge económico provocado por la guerra de Corea, en algunos países constituyen aun, conjuntamente con los superávit de las juntas de comercialización estatales, una parte considerable del total de las recaudaciones fiscales.

Es probable que, con raras excepciones, la mayoría de los derechos de exportatión recaigan en los productores y comerciantes del país que los impone, y no en los consumidores del exterior. Se ha podido comprobar que los derechos de exportatión de carácter permanente contribuyen por lo general a reducir el volumen de las exportaciones o a retrasar su crecimiento. Tal vez esto no constituya una objeción contundente, puesto que posiblemente la pérdida sufrida por concepto de los ingresos provenientes de las exportaciones sea pequeña, y los impuestos alternatíves que vienen a sustituirlos ejercerían también efectos adversos.

Los derechos de exportatión variables poseen ciertas aptitudes para aminorar la inestabilidad causada por las fluctuaciones que experimentan los precios de exportatión, pero para que su aplicación tenga éxito en ese sentido se requiere su répida adaptatión a las cambiantes condiciones del mercado, y un cuidadoso control de los gastos públicos. Los derechos de exportatión de índole temporal se han empleado en caso de devaluaiones de la moneda a fin de absorber las utilidades imprevistas. Tales derechos deben irse reduciendo o eliminando a medida que los aumentos que registran los ingresos en moneda nacional que perciben los exportadores van resultando apropiados y necesarios para mantener y vigorizar los incentivos de exportatión.

La principal justificatión de los derechos de exportatión como fuente continua de ingresos radica en su conveniencia desde el punto de vista administrative Estos impuestos se prestan sobre todo para poder gravar los ingresos de los productores agrícolas en pequeño de aquellos países que carecen de una eficaz administratión tributaria interna. Aun cuando los derechos de exportatión no satisfacen las elevadas normas de equidad y eficiencia ecónomica, se pueden comparar favorablemente con otras medidas alternativas inmediatas. A la larga, la importancia fiscal de los derechos de exportatión habrá probablemente de disminuir conforme aumente la capacidad para administrar otros impuestos, y avance el desarrollo económico.


Mr. Goode, Director of the Fiscal Affairs Department, was formerly a staff member of the Brookings Institution, Washington; economist at the U.S. Treasury Department and the U.S. Bureau of the Budget; and assistant professor of economics at the University of Chicago.

Mr. Lent, Chief of the Tax Policy Division, formerly served as assistant director of the tax analysis staff, U.S. Treasury Department; consultant, Organization of American States; and research associate, National Bureau of Economic Research, New York. He taught at the University of North Carolina and Dartmouth College.

Mr. Ojha, economist in the Fiscal Affairs Department, was formerly Deputy Director of Research in the Reserve Bank of India; and professor and head of the Department of Economics at D.H. National and K.C. Colleges, Bombay. He taught at the University of Bombay and served as Fund advisor to the Government of Malaysia.


For a classification of these purposes see Jonathan V. Levin, The Export Economies: Their Pattern of Development in Historical Perspective (Cambridge, Massachusetts, 1960), pp. 263-64.


League of Nations, Economic and Financial Section, International Economic Conference, Export Duties (Geneva, 1927), p. 3.


Ibid., pp. 5-6; Lynn Ramsay Edminister, “Export Duties,” in Encyclopaedia of the Social Sciences (New York, 1931), Vol. VI, pp. 21-23.


Edminister, op. cit.; Florence K. Ioannu and Roberta P. Wakefield, Export Duties of the World, U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce, Foreign Tariff Series, No. 42 (Washington, 1927), pp. 1-2.


George Wythe, Industry in Latin America, 2nd ed. (New York, 1949), pp. 15, 48,70-71.


D. Walker, “Marketing Boards,” in Economic Development, edited by E.A.G. Robinson, International Economic Association (London, 1965), pp. 574-96; Levin, op. cit., pp. 221-24.


G. K. Helleiner, “The Fiscal Role of the Marketing Boards in Nigerian Economic Development, 1947-61,” The Economic Journal, Vol. LXXIV (1964), pp. 582-605.


See John M. Clark, “Export Taxes on Tropical Products,” Monthly Bulletin of Agricultural Economics and Statistics (Rome), UN Food and Agriculture Organization, Vol. 12, No. 5 (1963), pp. 10-15; and Kenneth J. Rothwell, “Taxes on Exports in Underdeveloped Countries,” Public Finance (The Hague), Vol. XVIII, No. ¾ (1963), pp. 310-25.


In Uganda, marketing board deficits for both coffee and cotton exceeded export duties in 1961/62. Ghana’s Cocoa Marketing Board realized deficits in each of the three years 1960/61 to 1962/63, and revenues from export duties declined sharply over this period.


Arithmetic means of percentages shown in Table 1.


Ceylon, Report of the Taxation Commission, Sessional Paper XVIII (Colombo, 1955).


George W. Stocking and Myron W. Watkins, Cartels in Action: Case Studies in International Business Diplomacy (New York, 1946), pp. 118-70.


In his study of rice production in Thailand, Ayal concludes that everyone in the production-marketing process pays a part of the export tax—exporters, millers, middlemen, and farmers. This backward shifting is attributed to the fact that elasticity of supply at all stages is smaller than elasticity of demand (Eliezer B. Ayal, “The Impact of Export Taxes on the Domestic Economy of Underdeveloped Countries,” The Journal of Development Studies (London), Vol. One (July 1965), p. 344).


John H. Adler, Eugene P. Schlesinger, and Ernest C. Olson, Public Finance and Economic Development in Guatemala (Stanford, California, 1952), pp. 100-102.


Henry C. Wallich and John H. Adler, Public Finance in a Developing Country: El SalvadorA Case Study (Cambridge, Massachusetts, 1951), pp. 125-26.


Edwin P. Reubens, “Commodity Trade, Export Taxes and Economic Development,” Political Science Quarterly, Vol. LXXI (1956), pp. 43-59.


Douglas S. Paauw, Financing Economic Development: The Indonesian Case (Glencoe, Illinois, 1960), pp. 230-44.


Where exports are controlled by an international commodity agreement or similar arrangement, the linkage between supply elasticity and export volume may be loose. See below.


See, for example, William J. Barber, “Economic Rationality and Behavior Patterns in an Underdeveloped Area: A Case Study of African Economic Behavior in the Rhodesias,” Economic Development and Cultural Change, University of Chicago, Vol. VIII (1960), pp. 237-51; P.T. Bauer and B.S. Yamey, “A Case Study of Response to Price in an Underdeveloped Country,” Notes and Memoranda, The Economic Journal, Vol. LXIX (1959), pp. 800-805; Brij Raj Chauhan, “Rise and Decline of a Cash Crop in an Indian Village,” Journal of Farm Economics (Ames, Iowa), Vol. 42 (1960), pp. 663-66; Edwin R. Dean, “Economic Analysis and African Responses to Price,” Journal of Farm Economics, Vol. 47 (1965), pp. 402-409; Walter P. Falcon, “Farmer Response to Price in a Subsistence Economy: The Case of West Pakistan,” The American Economic Review, Vol. LIV (1964), pp. 580-91; Raj Krishna, “Farm Supply Response in India-Pakistan: A Case Study of the Punjab Region,” The Economic Journal, Vol. LXXIII (1963), pp. 477-87; Dharm Narain, Impact of Price Movements on Areas Under Selected Crops in India, 1900–1939 (Cambridge, 1965); C.E. Staley, “A Case Study of Response to Agricultural Prices in Costa Rica,” The Economic Journal, Vol. LXXI (1961), pp. 432-36; Robert M. Stern, “The Price Responsiveness of Primary Producers,” The Review of Economics and Statistics (Cambridge, Massachusetts), Vol. XLIV (1962), pp. 202-207.


Robert M. Stern, “The Price Responsiveness of Egyptian Cotton Producers,” Kyklos (Basle), Vol. XII (1959), pp. 375-84.


R.S. Porter, “Comments on Professor Nurkse’s Paper,” Kyklos, Vol. XI (1958), pp. 231-43.


Dean, op. cit.


P.T. Bauer and F.W. Paish, “The Reduction of Fluctuations in the Incomes of Primary Producers,” The Economic Journal, Vol. LXII (1952), p. 760.


Robert M. Stern, “Malayan Rubber Production, Inventory Holdings, and the Elasticity of Export Supply,” The Southern Economic Journal, Vol. XXXI (1965), pp. 314-23.


P.T. Bauer and F.W. Paish, “The Reduction of Fluctuations in the Incomes of Primary Producers Further Considered,” The Economic Journal, Vol. LXIV (1954), pp. 708-709; P. Ady, “Trends in Cocoa Production: British West Africa,” Oxford University, Institute of Statistics, Bulletin, Vol. 11 (1949), pp. 398-99.


United Nations, Commodity Survey, 1958 (New York, 1959), pp. 1-58.


Paauw, op. cit., pp. 185-245.


R. Galletti, K.D.S. Baldwin, and I.O. Dina, Nigerian Cocoa Farmers: An Economic Survey of Yoruba Cocoa Farming Families, Nigerian Cocoa Marketing Board (London, 1956), pp. 3-4.


Ady, op. cit., pp. 389-404.


Merrill J. Bateman, “Aggregate and Regional Supply Functions for Ghanaian Cocoa, 1946-62,” Journal of Farm Economics, Vol. 47 (1965), pp. 384-401. Bateman estimates elasticity of production with respect to prices of relevant prior years at 0.42 to 0.87 in different regions.


Economic Research Bureau, Commodity Year Book, 1964 (New York, 1964).




During the 1930’s the duties which were removed or repealed, in spite of budget difficulties, exceeded in importance those which were increased. See Margaret S. Gordon, Barriers to World Trade: A Study of Recent Commercial Policy (New York, 1941), pp. 350-51.


Paauw, op. cit., p. 241.


See, for example, W. Arthur Lewis, The Theory of Economic Growth (Home-wood, Illinois, 1954), p. 291; and United Nations, Technical Assistance Administration, “Fiscal Policies for Under-Developed Economies,” Taxes and Fiscal Policy in Under-Developed Countries, ST/TAA/M/8 (New York, 1954), pp. 12-


Cf. Levin, op. cit., p. 211.


In Malaya, income tax rates levied on profits of a company were revised upward; in Indonesia, exchange certificates were introduced to support export levies.


See United Nations, Economic Commission for Asia and the Far East, Economic Survey of Asia and the Far East, 1951 (New York, 1952), pp. 185-228; and United Nations, Department of Economic and Social Affairs, World Economic Report, 1950-53, and Summary of Recent Economic Developments, regional supplements to World Economic Report, 1950-53. See also Reubens, op. cit., pp. 59-61.


United Nations, World Economic Survey, 1957 (New York, 1958), p. 99.


Charles E. Staley, “Export Taxes in Ceylon, 1948-52,” Public Finance, Vol. XIV (1959), pp. 249-65.


Ragnar Nurkse, “Trade Fluctuations and Buffer Policies of Low-Income Countries,” Kyklos, Vol. XI (1958), pp. 141-54. See also the forceful statement of this position by H. W. Singer in the introduction to “Primary Producing Countries, Symposium II,” Kyklos, Vol. XII (1959), pp. 273-74.


P.T. Bauer and F.W. Paish, “Comments on Professor Nurkse’s Paper,” Kyklos, Vol. XI (1958}, p. 176.


Alexandre Kafka, “The Elasticity of Export Supply,” The Southern Economic Journal, Vol. XXXII (1966), p. 352.


Ifigenia M. de Navarrete, “Agricultural and Land Taxation,” in Government Finance and Economic Development, Third Study Conference on Problems of Economic Development held at Athens, December 1963, Organization for Economic Cooperation and Development (Paris, 1965), pp. 195-210.


Andreas S. Gerakis and Haskell P. Wald, “Economic Stabilization and Progress in Greece, 1953-61,” Staff Papers, Vol. XI (1964), p. 128.


India, Ministry of Commerce and Industry, Report of the Official Team on the Tea Industry (New Delhi, 1952), p. 28.


For example, in Ceylon with respect to tea (see Appendix, p. 484).


Report of the Taxation Commission (cited in fn. 11); and Staley (1959), op. cit.


See, for example, Alfred Marshall, Money, Credit and Commerce (London, 1929), pp. 177-209; A.C. Pigou, A Study in Public Finance, 3rd ed., revised (London, 1949), pp. 193-202; and Earl R. Rolph, The Theory of Fiscal Economics (Berkeley and Los Angeles, 1954), pp. 172-226. Marshall, nevertheless, said: “The considerations which can be urged for and against the levying of an import tax on a particular commodity differ widely from those appropriate to a particular export tax …” (op. cit., p. 180).


A similar system had been proposed in 1926 by the Woods Commission on Taxation.


See Report of the Taxation Commission (cited in fn. 11), pp. 270-79; and Staley (1959), op. cit.


In 1963, the biggest decline in prices was for high-grown tea although the decline affected all grades of tea sold at Colombo auctions. The decline is partly attributed to variations in quality of tea offered. “Nevertheless, there does appear to be evidence that the entry into the market of plain teas of poor leaf appearance, or unattractive liquor and not sufficiently well made, has also had on occasion a depressing effect on prices” (Central Bank of Ceylon, Annual Report (Colombo, 1963), p. 41).


In addition to the export duty, under Subsection (1) of Section 25 of the Tea Act, 1953, a cess is collected at the rate of Rs 4.40 per 100 kilograms on all teas exported; this worked out at 0.8 per cent of the 1962 average price per kilogram. The cess is credited to the Consolidated Fund of the Government of India, from which allotment of funds is made periodically to the Tea Board for the purposes of research, publicity, etc. The Tea Board also realizes fees for export licenses issued by it at the rate of Rs 2.20 per 1,000 kilograms. Besides, some of the state governments also impose sales and entry taxes on tea; see Tea Board, Ninth Administration Report (Calcutta, 1963), pp. 13-15. The Government also has levied an excise duty on tea since 1954; a part of the duty, however, is refundable when the tea is exported.


The Government did not quite implement the rate structure recommended by the Commission; for instance, the Commission had recommended abolition of duty on prices under 60 cents a pound.


For a detailed review of the rubber export duty in Malaya, see Lim Chong Yah, “Export Taxes on Rubber in Malaya—A Survey of Post-War Development,” The lournal of the Malayan Economic Review, Vol. V, No. V (1960), pp. 46-58.


Paauw, op. cit., pp. 182-90.


See Ayal, op. cit.


See Levin, op. cit.


For a discussion of this system, see Douglas B. Copland, “Australia and International Economic Equilibrium,” Economia Internationale (Genoa), Vol. IV, No. 1 (1951), pp. 49-50.


These minimums were (per ton) cocoa £150, cotton £325, groundnuts £65, palm kernels £50, and edible palm oil £75.


See Polly Hill, The Gold Coast Cocoa Farmer: A Preliminary Survey (London, 1956), pp. 112-13.


Effective July 19, 1965, the Ghana pound was replaced by the cedi (¢l = US$1.17).


International Bank for Reconstruction and Development, The Economic Development of Uganda (Baltimore, 1962), pp. 17-20; Walker, op. cit., pp. 574-98.


American, Wilds variety, LSd 0.5 per kantar of 100 rotls (99 pounds); American (other types), Lugata, Shawabik, and Scarto types are assessed at LSd 0.4 per kantar; Sakel types at LSd 1 per kantar; linters at LSd 0.25 per kantar; and Acala at LSd 0.7 per kantar.


U.S. Tariff Commission, Economic Controls and Commercial Policy in Argentina (Washington, 1945), p. 13.