IMF Working Papers

The Taxation Implicit in Two-Tiered Exchange Rate Systems

ByHarry Huizinga

November 1, 1996

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Format: Chicago

Harry Huizinga. "The Taxation Implicit in Two-Tiered Exchange Rate Systems", IMF Working Papers 1996, 120 (1996), accessed 12/20/2025, https://doi.org/10.5089/9781451854220.001

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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 two-tiered exchange rate system can be interpreted as a set of separate taxes on money and other financial assets. If the official two-tiered exchange rate system coexists with a black market for foreign exchange, then there is implicit taxation of the international goods trade as well. This paper presents some evidence on the tax rates and tax revenues implicit in the exchange rate systems of The Bahamas (from 1978 to 1995), the Dominican Republic (from 1970 to 1984), and South Africa (from 1973 to 1995).

Subject: Exchange rate arrangements, Exchange rates, Foreign exchange, Market exchange rates, Multiple currency practices, National accounts, Personal income

Keywords: Africa, black market, computed debt-service saving, debt service, debt-service saving, equilibrium exchange rate, Exchange rate arrangements, exchange rate practice, exchange rate system, Exchange rates, government debt yield, government yield differential, investment income, investment tax, Market exchange rates, Multiple currency practices, overvalued import exchange rate, Personal income, systems of The Bahamas, trade exchange rate, two-tiered exchange rates, WP

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