On the Use of Border Taxes in Developing Countries
Contrary to what is implied by the so called “Wahsington consensus”, Stiglitz (2003) has argued that in the least developed countries border taxes are superior to VAT. However, supported by much respectable research, the IMF and World Bank’s recommend that developing countries substitute VAT for border taxes. The present paper provides an easy to implement parameterised general equilibrium model which may be used as the basis for empirical research, required to reach a consensus opinion within the profession on the issue. The model allows for the fact that different tax systems are associated with different administrative costs, and represents the informal sector as a parameterisation, the CES-UT, of a utility function with explicit representation of the use of time. By means of a quantitative example, it illustrates, on the one hand, that a large informal sector in itself does not justify the use of border taxes, but, on the other hand, when administrative costs of taxation are taken into account, that the size of the informal sector, as claimed as Stiglitz (2003), is indeed important for whether the use of border taxes is desirable or not.
|Date of creation:||01 Feb 2008|
|Date of revision:||29 Jul 2011|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/econ
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. E. Stiglitz & P. Dasgupta, 1971.
"Differential Taxation, Public Goods, and Economic Efficiency,"
Review of Economic Studies,
Oxford University Press, vol. 38(2), pages 151-174.
- Joseph E. Stiglitz & Partha Dasgupta, 1970. "Differential Taxation, Public Goods, and Economic Efficiency," Cowles Foundation Discussion Papers 299, Cowles Foundation for Research in Economics, Yale University.
- Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
- M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
- Knud J., MUNK, 2008. "Welfare Effects of Tax and Price Changes Revisited," Discussion Papers (ECON - Département des Sciences Economiques) 2008006, Université catholique de Louvain, Département des Sciences Economiques.
- Knud Jørgen Munk, 2008. "Welfare Effects of Tax and Price Changes Revisited," Economics Working Papers 2008-03, Department of Economics and Business Economics, Aarhus University.
- Knud Munk, 2008. "Tax-tariff reform with costs of tax administration," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(6), pages 647-667, December.
- Knud MUNK, "undated". "Tax-Tariff Reform with costs of Tax Administration," Middle East and North Africa 330400045, EcoMod.
- Knud Jørgen Munk, 2006. "Tax-tariff reform with costs of tax administration," Economics Working Papers 2006-14, Department of Economics and Business Economics, Aarhus University.
- Knud Jørgen Munk, 2005. "Tax-tariff reform with costs of tax administration," Economics Working Papers 2005-21, Department of Economics and Business Economics, Aarhus University.
- Knud Jorgen MUNK, "undated". "Tax-Tariff Reform with Costs of Tax Administrations," EcoMod2004 330600102, EcoMod.
- Gardner, Grant W & Kimbrough, Kent P, 1992. "Tax Regimes, Tariff Revenues and Government Spending," Economica, London School of Economics and Political Science, vol. 59(233), pages 75-92, February.
- repec:ete:ceswps:ces9827 is not listed on IDEAS
- Knud Jørgen Munk, 1980. "Optimal Taxation with some Non-Taxable Commodities," Review of Economic Studies, Oxford University Press, vol. 47(4), pages 755-765.
- Munk, Knud Jorgen, 1978. " Optimal Taxation and Pure Profit," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(1), pages 1-19.
- Knud Jørgen Munk & Bo Sandemann Rasmussen, 2005. "On the Determinants of Optimal Border Taxes for a Small Open Economy," Economics Working Papers 2005-22, Department of Economics and Business Economics, Aarhus University. Full references (including those not matched with items on IDEAS)