Indirect Tax Initiatives and Global Rebalancing
This paper discusses how joint cross country indirect tax initiatives can be used to achieve global rebalancing. This is potentially an important development for G20 discussions which thus far have centered on exchange rates as the instruments to achieve rebalancing. We suggest that if China and Germany (as major surplus countries) switch their present VAT systems from a destination principle to an origin principle, and the US (as the major deficit country) adopts a VAT on a destination principle VAT, jointly these actions can significantly reduce the three countries' joint imbalances and so contribute to global rebalancing. We use a numerical general equilibrium model with a monetary structure incorporating inside money to capture endogeneity of trade imbalances, and to also investigate the potential impacts of such initiatives. These confirm that VAT structures are not only good for global rebalancing but also the changes we consider are beneficial for welfare and revenue collection. Our research is aimed to inject new ideas to the present global rebalancing debate.
|Date of creation:||Mar 2012|
|Note:||IFM ITI PE|
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- Genser, Bernd, 1996.
" A Generalized Equivalence Property of Mixed International VAT Regimes,"
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- Genser, Bernd, 1994. "A generalized equivalence property of mixed international VAT regimes," Discussion Papers, Series II 241, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
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- Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550, November.
- Whalley, John, 1979. "Uniform domestic tax rates, trade distortions and economic integration," Journal of Public Economics, Elsevier, vol. 11(2), pages 213-221, March.
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- Whalley John & Yu Jun & Zhang Shunming, 2012. "Trade Retaliation in a Monetary-Trade Model," Global Economy Journal, De Gruyter, vol. 12(1), pages 1-29, March.Full references (including those not matched with items on IDEAS)
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