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Tariff and Consumption Tax Reforms in a Developing Tourism Economy

Chi-Chur Chao (), Jean-Pierre Laffargue () and Hamid Beladi
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Chi-Chur Chao: CUHK - The Chinese University of Hong Kong [Hong Kong]
Jean-Pierre Laffargue: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the effects of a coordinated tax reform by replacing import tariffs with point-by-point increases in consumption taxes for a small-open developing tourism economy. Foreign tourists demand for the non-traded goods provided in the informal sector of the host economy, resulting in a tourism-induced terms-of-trade effect. The presence of inbound tourism lends a support to positive tariffs even for a small open economy. The indirect tax reform of this kind can increase residents' welfare and government revenue when the initial tariffs are relatively larger to the consumption taxes.

Keywords: Tariffs; consumption taxes; tourism (search for similar items in EconPapers)
Date: 2015-11-01
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Published in Journal of International Trade and Economic Development, 2015, 24 (6), pp.822-834

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