Domestic Taxes and International Trade: Some Evidence
IMF Working Papers, February 1, 2006
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- Domestic Taxes and International Trade: Some Evidence
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Bibliographic details
- Authors: Michael Keen, Murtaza H Syed
- Published: February 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863079.001
Overview and methodology
- Authors: Michael Keen, Murtaza H Syed
- Date: February 1, 2006
- Data and sample period: panel data for OECD countries from 1967 to 2003
- Publication: IMF Working Papers; Working Paper No. 2006/047
- Pages: 30
- Volume: 2006; Issue: 047
- DOI: https://doi.org/10.5089/9781451863079.001
- ISBN: 9781451863079
- ISSN: 1018-5941
Research question and focus
- Examines the effects of corporate taxes and the value-added tax (VAT) on export performance.
- Pays particular attention to potentially complex dynamic effects indicated by theory.
Key empirical findings
- VAT effects:
- Increased reliance on VAT revenue tends to be associated with a sharp reduction in net exports, which quickly fades.
- This initial association may reflect unrelated movements in consumption.
- Preferred specifications point to no trade effects of the VAT in either the short or the long run.
- Corporate tax effects:
- Increases in corporate taxation—whether measured by revenues or the statutory rate—are associated with sharp short-run increases in net exports (consistent with induced capital flows abroad).
- These short-run increases are subsequently and quickly reversed (consistent with increased income from investments abroad).
- The reversal leaves an increase in net exports that converges to zero.
- Overall interpretation:
- Results point to powerful and complex effects from the corporate tax, with patterns consistent with theoretical predictions for a source-based tax.
- VAT appears not to have persistent trade effects once preferred specifications and consumption dynamics are accounted for.
Subjects and keywords
- Subject: Consumption, Corporate income tax, Exports, Revenue administration, Value-added tax
- Keywords: present value, tax revenue, trade balance, WP
IMF Working Paper No. 2006/047, Michael Keen and Murtaza H Syed, February 1, 2006. DOI: https://doi.org/10.5089/9781451863079.001