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Pollution and reforms of domestic and trade taxes towards uniformity

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  • Michael Michael
  • Panos Hatzipanayotou

Abstract

This paper builds a small open economy trade model where there is pollution from the production and consumption of goods. In the presence of production and consumption pollution, we examine a piecemeal consumer-price-neutral reform of the tariff and consumption tax and a piecemeal producer-price-neutral reform of the export and production taxes on a specific good. The paper identifies sufficient conditions under which the above tax reforms improve welfare and increase government tax revenues. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Michael Michael & Panos Hatzipanayotou, 2013. "Pollution and reforms of domestic and trade taxes towards uniformity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(5), pages 753-768, October.
    • Handle: RePEc:kap:itaxpf:v:20:y:2013:i:5:p:753-768
    DOI: 10.1007/s10797-012-9241-0
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    References listed on IDEAS

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    1. Michael, Michael S. & Hatzipanayotou, Panos & Miller, Stephen M., 1993. "Integrated reforms of tariffs and consumption taxes," Journal of Public Economics, Elsevier, vol. 52(3), pages 417-428, October.
    2. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    3. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, vol. 44(1-2), pages 147-151.
    4. Panos Hatzipanayotou & Sajal Lahiri & Michael Michael, 2008. "Cross-Border Pollution, Terms of Trade, and Welfare," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 327-345, November.
    5. Anderson, James E. & Neary, J. Peter, 2007. "Welfare versus market access: The implications of tariff structure for tariff reform," Journal of International Economics, Elsevier, vol. 71(1), pages 187-205, March.
    6. John C. Beghin & Sebastien Dessus, 1999. "Double Dividend with Trade Distortions: Analytical Results and Evidence from Chile," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 99-wp225, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    7. John Beghin & David Roland-Holst & Dominique van der Mensbrugghe, 1997. "Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 442-455, May.
    8. Ronald Davies & Lourenço Paz, 2011. "Tariffs versus VAT in the presence of heterogeneous firms and an informal sector," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(5), pages 533-554, October.
    9. Emran, M. Shahe, 2005. "Revenue-increasing and welfare-enhancing reform of taxes on exports," Journal of Development Economics, Elsevier, vol. 77(1), pages 277-292, June.
    10. Neary, Peter & Ruane, Frances P, 1988. "International Capital Mobility, Shadow Prices, and the Cost of Protection," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 571-585, November.
    11. Takumi Naito, 2005. "Revenue‐Neutral Environmental Tariff Reform, Growth, and Welfare," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 985-996, November.
    12. Arja H. Turunen‐Red & Alan D. Woodland, 2004. "Multilateral Reforms of Trade and Environmental Policy," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 321-336, August.
    13. Keen, Michael & Ligthart, Jenny E., 2002. "Coordinating tariff reduction and domestic tax reform," Journal of International Economics, Elsevier, vol. 56(2), pages 489-507, March.
    14. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
    15. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 421-443, August.
    16. Naito, Takumi, 2006. "Growth, revenue, and welfare effects of tariff and tax reform: Win-win-win strategies," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1263-1280, August.
    17. Wilson, John Douglas, 1991. "Optimal Public Good Provision with Limited Lump-Sum Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 153-166, March.
    18. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2008. "Tari[ff]-tax reforms and market access," Journal of Development Economics, Elsevier, vol. 87(1), pages 85-91, August.
    19. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
    20. Takumi Naito & Kenzo Abe, 2008. "Welfare‐ and Revenue‐Enhancing Tariff and Tax Reform under Imperfect Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1085-1094, December.
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    Cited by:

    1. Haitao Cheng, 2023. "Consumption pollution and taxes with endogenous firm locations and different market sizes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1601-1632, December.
    2. Michael S. Michael & Panos Hatzipanayotou, 2013. "Cooperative and Non-Cooperative Equilibrium Consumption Taxes in the Presence of Cross-Border Pollution," CESifo Working Paper Series 4501, CESifo.
    3. Catia Montagna & Avanti Nisha Pinto & Nikolaos Vlassis, 2020. "Welfare and Trade Effects of International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 331-345, July.
    4. Takumi Haibara, 2022. "A note on pollution and reforms of domestic and trade taxes toward uniformity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 201-214, February.
    5. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.

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    More about this item

    Keywords

    Domestic and trade tax reforms; Production and consumption generated pollution; Government tax revenues; Welfare; F13; H20;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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