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On the Rationale for the Use of Border Taxes in Developing Countries

  • Knud Jørgen Munk

    ()

    (School of Economics and Management, University of Aarhus, Denmark)

With reference to the size of the informal sector, Stiglitz (2003) argues that border taxes are superior to VAT in certain developing countries. By way of a quantitative example this paper shows that, while Stiglitz’ claim is probably will turn out to be correct, a large informal sector is not a sufficient condition for border taxes to be preferable to a VAT regime as shown by Keen (2006). Making the case for using border taxes also requires the plausible supplementary assumptions that (i) border taxes are associated with lower administrative costs, and (ii) that this difference is sufficiently large to justify the larger distortionary costs associated with border taxes compared to domestic taxes.

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File URL: ftp://ftp.econ.au.dk/afn/wp/06/wp06_12.pdf
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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2006-12.

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Length: 11
Date of creation: 30 Dec 2006
Date of revision:
Handle: RePEc:aah:aarhec:2006-12
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. Francesco Busato & Enrico Marchetti, 2006. "Skills, sunspots and cycles," Economics Working Papers 2006-07, School of Economics and Management, University of Aarhus.
  2. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, 2008. "Home ownership, job duration, and wages," Journal of Urban Economics, Elsevier, vol. 63(1), pages 130-145, January.
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