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The whys and why nots of export taxation

Author

Listed:
  • Devarajan, Shantayanan
  • Go, Delfin
  • Schiff, Maurice
  • Suthiwart-Narueput, Sethaput

Abstract

The authors review the arguments for taxing imports, considering two cases: one in which a country has market power in the export commodity, and one in which it does not. They conclude that for countries having market share there are strong analytical and practical arguments for an export tax. While the optimal level of the export tax may depend on the strategic behavior of other exporting and importing countries, on such practical issues as long-run market power, on whether smuggling exists, or on general equilibrium effects, these factors do not reverse the desirability of export taxation for countries with market share. Neither do alternative instruments such as export quotas and cartels, which could potentially yield a better outcome, negate this conclusion. The authors also find that countries without market share are not similarly situated to those with it. To the contrary, for most small, open economies that do not have market power in export markets, taxing imports is harmful not only to imports but also to general economic welfare and growth. Export taxes generate serious economic distortions and disincentives and are a poor instrument for encouraging higher-value-added activities. And in revenue generation, they are likely to be dominated by other tax instruments, and should be viewed as a transitional measure at best, to be replaced as soon as tax administration improves.

Suggested Citation

  • Devarajan, Shantayanan & Go, Delfin & Schiff, Maurice & Suthiwart-Narueput, Sethaput, 1996. "The whys and why nots of export taxation," Policy Research Working Paper Series 1684, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1684
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    References listed on IDEAS

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    1. Pack, Howard, 1988. "Industrialization and trade," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 9, pages 333-380 Elsevier.
    2. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
    3. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May.
    4. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    5. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 205-228.
    6. Hoff, Karla, 1991. "Land Taxes, Output Taxes, and Sharecropping: Was Henry George Right?," World Bank Economic Review, World Bank Group, vol. 5(1), pages 93-111, January.
    7. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Panagariya, Arvind & Schiff, Maurice, 1991. "Taxes versus quotas : the case of cocoa exports," Policy Research Working Paper Series 756, The World Bank.
    9. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
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    Citations

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    Cited by:

    1. Gourdon, Julien & Monjon, St├ęphanie & Poncet, Sandra, 2016. "Trade policy and industrial policy in China: What motivates public authorities to apply restrictions on exports?," China Economic Review, Elsevier, vol. 40(C), pages 105-120.
    2. Michael Keen & David E. Wildasin, 2000. "Pareto Efficiency in International Taxation," CESifo Working Paper Series 371, CESifo Group Munich.
    3. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March.
    4. Yilmaz, Kamil, 1999. "Optimal export taxes in a multicountry framework," Journal of Development Economics, Elsevier, vol. 60(2), pages 439-465, December.
    5. Orlov, Anton, 2015. "An assessment of proposed energy resource tax reform in Russia: A static general equilibrium analysis," Energy Economics, Elsevier, vol. 50(C), pages 251-263.
    6. Amzul Rifin, 2015. "The Impact of Export Tax Policy on Cocoa Farmers and Supply Chain," The International Trade Journal, Taylor & Francis Journals, vol. 29(1), pages 39-62, March.

    More about this item

    Keywords

    Export Competitiveness; Environmental Economics&Policies; Economic Theory&Research; Public Sector Economics&Finance; Tax Law;

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