IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/12279.html
   My bibliography  Save this paper

Compensating Lost Revenue in Regional Trade Agreements

Author

Listed:
  • Walkenhorst, Peter

Abstract

For countries that have weak domestic tax administrations and rely heavily on trade taxes for government finances, lowering or eliminating tariffs on trade with regional partners can pose a significant fiscal risk. To pursue regional integration despite that risk, provisions on revenue sharing have been added to several RIIs, although not all are operational. Analysis of existing arrangements suggests several desirable design features for RLCAs-among them the use of domestic tax revenues instead of economically more costly trade taxes as the preferred means of raising revenues for compensation. Moreover, simple payout criteria, possibly historically based, facilitate the monitoring and administration of the mechanism. And finally, limited periods of duration and a reduction of compensation payments over time are consistent with the revenue-enhancing effect of trade-induced growth and preserve the incentive for governments to pursue fiscal reforms.

Suggested Citation

  • Walkenhorst, Peter, 2006. "Compensating Lost Revenue in Regional Trade Agreements," MPRA Paper 12279, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12279
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/12279/1/MPRA_paper_12279.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Busse, Matthias & Grossmann, Harald, 2004. "Assessing the Impact of ACP/EU Economic Partnership Agreement on West African Countries," Discussion Paper Series 26198, Hamburg Institute of International Economics.
    2. Keen, Michael & Ligthart, Jenny E., 2002. "Coordinating tariff reduction and domestic tax reform," Journal of International Economics, Elsevier, vol. 56(2), pages 489-507, March.
    3. Baunsgaard, Thomas & Keen, Michael, 2010. "Tax revenue and (or?) trade liberalization," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 563-577, October.
    4. Clarete, Ramon L. & Whalley, John, 1987. "Comparing the marginal welfare costs of commodity and trade taxes," Journal of Public Economics, Elsevier, vol. 33(3), pages 357-362, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hazel Parcon, 2008. "Disaggregating PTAs at the Role of International Division of Labor on PTA Formation," Working Papers 200806, University of Hawaii at Manoa, Department of Economics.
    2. Mr. Jean-Jacques Hallaert, 2007. "Can Regional Integration Accelerate Development in Africa? CGE Model Simulations of the Impact of the SADC FTA on the Republic of Madagascar," IMF Working Papers 2007/066, International Monetary Fund.
    3. Chiumya, Chiza, 2009. "Regional Trade Agreements: An African perspective of Challanges for Customs Policies and Future Strategies," MPRA Paper 17838, University Library of Munich, Germany, revised Aug 2009.
    4. Yaya, OlaOluwa S & Ling, Pui Kiew & Furuoka, Fumitaka & Ezeoke, Chinyere Mary Rose & Jacob, Ray Ikechukwu, 2018. "Can Western African countries catch up with Nigeria? Evidence from Smooth Nonlinearity method in Fractional Unit root framework," MPRA Paper 90517, University Library of Munich, Germany.
    5. OlaOluwa S.Yaya & Pui Kiew Ling & Fumitaka Furuoka & Chinyere Mary Rose Ezeoke & Ray Ikechukwu Jacob, 2019. "Can West African countries catch up with Nigeria? Evidence from smooth nonlinearity method in fractional unit root framework," International Economics, CEPII research center, issue 158, pages 51-63.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian EBEKE & Hélène EHRHART, 2011. "Does VAT reduce the instability of tax revenues?," Working Papers 201124, CERDI.
    2. Kim, Sunghyun H. & Kose, M. Ayhan, 2014. "Welfare implications of trade liberalization and fiscal reform: A quantitative experiment," Journal of International Economics, Elsevier, vol. 92(1), pages 198-209.
    3. Kowsar Yousefi & Mohammad Vesal, 2023. "The Double Dividend of a Joint Tariff and VAT Reform: Evidence from Iran," The World Bank Economic Review, World Bank, vol. 37(2), pages 331-349.
    4. Kodjo Adandohoin & Vigninou Gammadigbe, 2022. "The revenue efficiency consequences of the announcement of a tax transition reform: The case of WAEMU countries," African Development Review, African Development Bank, vol. 34(S1), pages 195-218, July.
    5. Michael Keen, 2007. "VAT attacks!," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 365-381, August.
    6. Kodjo Adandohoin, 2021. "Tax transition in developing countries: do value added tax and excises really work?," International Economics and Economic Policy, Springer, vol. 18(2), pages 379-424, May.
    7. 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.
    8. Giulia Mascagni, 2016. "Aid and Taxation in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 52(12), pages 1744-1758, December.
    9. Haibara Takumi, 2017. "Indirect Tax Reform in Developing Countries: A Consumption-Neutral Approach," Journal of Globalization and Development, De Gruyter, vol. 8(1), pages 1-11, June.
    10. Anderson, James E. & Neary, J. Peter, 2016. "Sufficient statistics for tariff reform when revenue matters," Journal of International Economics, Elsevier, vol. 98(C), pages 150-159.
    11. Sèna Kimm Gnangnon, 2023. "Trade costs and tax transition reform in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 941-977, October.
    12. Keen, Michael, 2008. "VAT, tariffs, and withholding: Border taxes and informality in developing countries," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1892-1906, October.
    13. Kodjo Adandohoin & Jean-Francois Brun, 2020. "Are incomes and property taxes effective instruments for tax transition?," Working Papers hal-03053683, HAL.
    14. Christian Hubert Ebeke & Hélène Ehrhart, 2012. "Does VAT reduce the instability of tax revenues?," CERDI Working papers halshs-00617272, HAL.
    15. 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.
    16. James E. Anderson & J. Peter Neary, 2013. "Revenue Tariff Reform," NBER Working Papers 19752, National Bureau of Economic Research, Inc.
    17. Kenji Fujiwara, 2016. "Tax Principles and Tariff-Tax Reforms under International Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 84-98, February.
    18. Keiko Kubota, 2005. "Fiscal Constraints, Collection Costs, And Trade Policies," Economics and Politics, Wiley Blackwell, vol. 17(1), pages 129-150, March.
    19. Hazel Parcon, 2008. "Disaggregating PTAs at the Role of International Division of Labor on PTA Formation," Working Papers 200806, University of Hawaii at Manoa, Department of Economics.
    20. Kenji Fujiwara, 2013. "A Win–Win–Win Tariff–Tax Reform under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 857-867, November.

    More about this item

    Keywords

    Regional integration; tariff revenues; compensation mechanisms; tax replacement;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:12279. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.