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The coordinated reform of tariffs and domestic indirect taxes

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  • Mitra, Pradeep
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    Abstract

    Tariffs on imports protect domestic producers and raise public revenue. The World Development Report 1987 finds that effective rates of protection to manufacturing in developing countries typically exceed 40 percent; while the World Development Report 1988 estimates that the importance of import taxes in tax revenue is over 20 percent in Asia, sub-Saharan Africa and in the Middle East and North Africa, compared to 2 percent in the industrial countries. These figures clearly show that tariff reform, which is intended to reduce anti-export bias and promote an outward-oriented development strategy, can be viable only if alternative and administratively collectible sources of revenue can be found to offset potential revenue losses. The tradeoff between liberalization and fiscal imperatives is thus frequently central to tariff reform. This paper argues that tariff reform must be seen as part of a broader program of tax reform. The need to adopt such a public finance perspective is argued with reference to selective reviews of country experience with trade liberalization and tax reform, protection and revenue objectives in developing countries and the instruments available to further those policy goals.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 490.

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    Date of creation: 31 Aug 1990
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    Handle: RePEc:wbk:wbrwps:490

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    Keywords: Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Public Sector Economics&Finance; Trade and Regional Integration;

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    1. Skinner, Jonathan, 1991. "Prospects for Agricultural Land Taxation in Developing Countries," World Bank Economic Review, World Bank Group, vol. 5(3), pages 493-511, September.
    2. Chhibber, Ajay & Khalilzadeh-Shirazi, Javad, 1988. "Public finance in adjustment programs," Policy Research Working Paper Series 128, The World Bank.
    3. Bertrand, Trent J, 1972. "Decision Rules for Effective Protection in Less Developed Economies," American Economic Review, American Economic Association, vol. 62(4), pages 743-46, September.
    4. Imran, Mudassar & Duncan, Ron, 1988. "Optimal export taxes for exporters of perennial crops," Policy Research Working Paper Series 10, The World Bank.
    5. T. N. Srinivasan & J. N. Bhagwati, 1976. "Shadow Prices for Project Selection in the Presence of Distortions: Effective Rates of Protection and Domestic Resource Costs," Working papers 180, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Balassa, Bela, 1989. "Tariff policy and taxation in developing countries," Policy Research Working Paper Series 281, The World Bank.
    7. Heady, Christopher J. & Mitra, Pradeep K., 1992. "Commodity taxation with administered and free market prices: theory and an application to China," Journal of Public Economics, Elsevier, vol. 47(2), pages 207-225, March.
    8. Ebrahimi, Ahmad & Heady, Christopher, 1987. "Tax Design and Household Composition," Economic Journal, Royal Economic Society, vol. 98(390), pages 83-96, Supplemen.
    9. Linn, Johannes F. & Wetzel, Deborah L., 1989. "Public finance, trade, and development : what have we learned?," Policy Research Working Paper Series 181, The World Bank.
    10. Balassa, Bela, 1989. "Outward orientation," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 31, pages 1645-1689 Elsevier.
    11. Helpman, E., 1989. "The Non-Competitive Theory Of International Trade And Trade Policy," Papers 18-89, Tel Aviv.
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    Cited by:
    1. Dahl, Henrik & Mitra, Pradeep, 1990. "Applying tax policy models in country economic work : Bangladesh, China, and India," Policy Research Working Paper Series 504, The World Bank.

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