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Vietnam's New Environmental Tax Law: What Will It Cost? Who Will Pay?

Ian Coxhead and Nguyen Van Chan
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Nguyen Van Chan: National Economics University, Hanoi

Staff Paper Series from University of Wisconsin, Agricultural and Applied Economics

Abstract: We examine the effects of a proposed environmental tax in a small open developing economy, using an applied general equilibrium model linked to a household survey database. The burden of the tax, applied primarily to fossil fuels, is passed forward by non-traded industries and backward by industries selling into the world market. It causes efficiency and competitiveness losses equivalent to those of a real exchange rate appreciation, and since export industries are in general highly labor-intensive, is regressive and thus poverty-increasing. The budget-neutral use of increased tax revenues to raise spending on anti-poverty programs can offset most of the losses of poor households, but does not create new jobs. The extent of overall losses and their distribution is sensitive to some parameters, such as labor supply response, about which little is currently known in a developing-country context.

JEL-codes: D58 H23 O53 Q52 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Vietnam’s New Environmental Tax Law: What Will it Cost? Who Will Pay? (2011) Downloads
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