Information, Corruption, and Measures for the Promotion of Manufactured Exports

There has been a growing emphasis in many developing countries on export-led growth policies that attract both domestic and foreign investment into activities that will increase exports. Many countries, however, have not achieved the desired response. Among other problems, investors often face foreign exchange controls, tariffs on imported inputs, and a costly system for the exemption or refund of sales inflow of foreign investment and prevented the expansion of export production and sales. This paper addresses two issues related to the design and administration of the fiscal provisions that affect the competitiveness of country in the production of manufactured exports. The first issue is how to design a system that allows exporters to sell their output free of the burden of domestic sales taxes. The second issue is how to relieve exporters from the burden of import tariffs levied on inputs used in the production of exports. In this study, we also provide a synthesis of how a number of developing countries have tried to address these issues. We identify the elements of the administrative system needed to deliver effectively the VAT input tax credit refunds and to eliminate the burden of import duties on inputs used in exports. Emphasis will be placed on the information needs for their effective administration. These findings might prove helpful to policymakers who are faced with the development of institution to administer such border tax adjustments.