Walkenhorst, Peter (2006): Compensating Lost Revenue in Regional Trade Agreements.
Download (64kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Compensating Lost Revenue in Regional Trade Agreements|
|Keywords:||Regional integration, tariff revenues, compensation mechanisms, tax replacement|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H27 - Other Sources of Revenue
|Depositing User:||Peter Walkenhorst|
|Date Deposited:||20 Dec 2008 07:28|
|Last Modified:||14 Jan 2016 18:30|
Baunsgaard, T., and M. Keen, 2005. Tax Revenue and (or?) Trade Liberalization. Working Paper WP/05/112. International Monetary Fund, Washington, DC.
Busse, M., and H. Grossmann. 2004. Assessing the Impact of ACP/EU Economic Partnership Agreement on West African Countries. HWWA Discussion Paper 294. Hamburgisches Welt- Wirtschafts-Archiv, Hamburg.
Clarete, R., and J. Whalley. 1987. “Comparing the Marginal Welfare Costs of Commodity and Trade Taxes.” Journal of Public Economics 33: 357–62.
Keen, M., and J. Ligthart. 2001. “Coordinating Tariff Reductions and Domestic Tax Reform.” Journal of International Economics 56: 407–25.
Kirk, R., and M. Stern. 2003. The New Southern African Customs Union Agreement. Africa Region Working Paper Series 57. World Bank, Washington, DC.
World Bank. 2004. Global Economic Prospects 2005: Trade, Regionalism, and Development. Washington, DC: World Bank.