Fighting the soaring prices of agricultural food products. VAT versus Trade tariffs exemptions in a context of imperfect competition in Niger: CGE and micro-simulation approach

Celine de Quatrebarbes, Bertrand Laporte and Stéphane Calipel
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Celine de Quatrebarbes: FERDI - Fondation pour les Etudes et Recherches sur le Développement International
Stéphane Calipel: CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne

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Abstract: As happened in West Africa in 2008, in an imported inflation context, it is common for the governments to take short-term tax action to protect the poor: VAT or trade tariffs exemptions. As part of the tax-tariff transition, the comparison between Trade tariffs and VAT has already been the subject of much works. The introduction of VAT, as a tax on final consumption, is supposed to be optimal, due to its economically neutral aspect for production decisions. However, some authors show that in developing countries, a large informal sector affects this result. In this paper, we use a CGE model and a micro-simulation model to compare the effects of VAT and Trade tariffs exemptions to combat rising agricultural food prices. The approach is innovative because it integrates how VAT works in developing countries (VAT increases production costs for some producers), in a context of imperfect competition for the service of marketing products. Results show that VAT exemptions are more effective than Trade tariffs exemptions in limiting the effects of the rise in world prices on poverty in Niger. In the context of the current increase in food prices linked to the Covid-19 crisis (FAO, 2020), this issues may one again be in the limelight for the African governments.

Keywords: Computable general equilibrium model; Imperfect competition; Indirect taxes; Poverty; Niger (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-cmp and nep-int
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Working Paper: Fighting the soaring prices of agricultural food products. VAT versus Trade tariffs exemptions in a context of imperfect competition in Niger: CGE and micro-simulation approach (2021)
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