De-linking the Relationship between Trade Liberalization and Reduced Domestic Fiscal Budgets: The Experience of the Israeli Economy: 1984-2005
AbstractIssues concerning the consequences of trade liberalization and the resulting reduction in domestic fiscal budgets have always been the 'hot' topic in the trade policy community. This paper approaches this issue by focusing on the experience of the Israeli economy in the twenty year period (1984-2005) where Israel undertook both major tariff liberalization and a related domestic tax reform, with no reversion to border taxes. The Israeli experience highlights the initial budget revenue concerns associated with tariff liberalization, and quickly moves the issue away from border tax substitutes to domestic issues concerning enforcement. By de-linking the two issues the paper demonstrates that it is feasible to successfully tackling both external and internal tax reforms. Furthermore, it demonstrates that it is possible not to fall into the trap of looking at border taxes as a cure for internal high costs of tax revenue. The appropriate prescription for other developing or newly industrialized countries is to de-link the two tax issues, focus on the collection side of the domestic tax structure while at the same time reducing local taxes and broadening the tax base.
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Bibliographic InfoArticle provided by De Gruyter in its journal Global Economy Journal.
Volume (Year): 6 (2006)
Issue (Month): 3 (September)
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Web page: http://www.degruyter.com
Other versions of this item:
- Joseph Pelzman & Amir Shoham, 2006. "Delinking the Relationship between Trade Liberalization and Reduced Domestic Fiscal Budgets: The Experience of the Israeli Economy 1984-2005," International Trade and Finance Association Conference Papers 1073, International Trade and Finance Association.
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- Harrison, Ann & Rodríguez-Clare, Andrés, 2010.
"Trade, Foreign Investment, and Industrial Policy for Developing Countries,"
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- Ann Harrison & Andrés Rodríguez-Clare, 2009. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," NBER Working Papers 15261, National Bureau of Economic Research, Inc.
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