Coordinating Tariff Reduction and Domestic Tax Reform

Author/Editor:

Michael Keen ; Jenny E Ligthart

Publication Date:

July 1, 1999

Electronic Access:

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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:

A key obstacle to fundamental tariff reform in many developing countries is the revenue loss that it ultimately implies. This paper establishes a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenues, showing that for a small open economy, a cut in tariffs combined with a point-for-point increase in domestic consumption taxes increases both welfare and public revenues. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features as nontradeable goods, intermediate inputs, and imperfect competition.

Series:

Working Paper No. 99/93

English

Publication Date:

July 1, 1999

ISBN/ISSN:

9781451851632/1018-5941

Stock No:

WPIEA0931999

Format:

Paper

Pages:

20

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