Is It Worth Taxing Pirated Products? The Case of Optical Media Discs in the Philippines
Karen Annette D. Lazaro and
Kevin Thomas G. Cruz
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Karen Annette D. Lazaro: University of the Philippines, School of Economics, Diliman, Q.C. 1101, Philippines.
Kevin Thomas G. Cruz: University of the Philippines, School of Economics, Diliman, Q.C. 1101, Philippines.
Asian Economic Papers, 2010, vol. 9, issue 2, 79-112
This paper questions the conventional argument that the existence of a black market provides negative externalities in the form of foregone tax revenues that could otherwise be used to increase social welfare. It is not enough to estimate the size of the black market, one should also show how much of this can be eradicated, and how much of what is eradicated can be replaced by legitimate (taxable) goods, and how much of what is replaced can generate actual tax revenue. When all these are taken into account, the actual tax loss from piracy may be trivial. We illustrate this point using time-series data on optical media disc piracy in the Philippines. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
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