IMF Working Papers

Tax Revenue and (or?) Trade Liberalization

By Michael Keen, Thomas Baunsgaard

June 1, 2005

Download PDF

Preview Citation

Format: Chicago

Michael Keen, and Thomas Baunsgaard. Tax Revenue and (or?) Trade Liberalization, (USA: International Monetary Fund, 2005) accessed November 4, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

With the public finances of many developing and emerging market countries still heavily dependent on trade tax revenues, further trade liberalization may be hindered unless they are able to develop alternative sources of revenue. While there is now a well-established body of theory and policy advice on how this might be done in principle, this paper uses panel data for 111 countries over 25 years- cleaned for a variety of problems in standard data sources-to ask what has happened in practice: Have countries in fact recovered from other sources the revenues they have lost from past episodes of trade liberalization? High-income countries clearly have. For middle-income countries, recovery has been in the order of 45-60 cents for each dollar of lost trade tax revenue, with signs of close to full recovery when separately identifying episodes in which trade tax revenues fell. Troublingly, however, revenue recovery has been extremely weak in low-income countries (which are those most dependent on trade tax revenues): they have recovered, at best, no more than about 30 cents of each lost dollar. Nor is there much evidence that the presence of a value-added tax has in itself made it easier to cope with the revenue effects of trade liberalization.

Subject: Expenditure, Revenue administration, Taxes on trade, Trade liberalization, Value-added tax

Keywords: Revenue, Taxation, Trade, Trade tax, WP

Publication Details

  • Pages:

    30

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2005/112

  • Stock No:

    WPIEA2005112

  • ISBN:

    9781451861310

  • ISSN:

    1018-5941

You May Also Be Interested In...

The Federal Democratic Republic of Ethiopia: First Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

November 4, 2024

Kenya: Seventh and Eighth Reviews Under the Extended Fund Facility and Extended Credit Facility Arrangements, Requests for Reduction of Access, Augmentation and Rephasing of Access Under the Arrangements, Modifications of Performance Criteria, Waiver of Nonobservance of Performance Criteria, and Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Kenya

November 1, 2024

Public Investment Management Bottlenecks in Low-income Countries

November 1, 2024

Republic of Armenia: Technical Assistance Report-Corporate Income Tax Gap Prediction 2023 Based on Corporate Income Tax Returns

November 1, 2024