Coordinating Tariff Reduction and Domestic Tax Reform

Michael Keen and Jenny Ligthart

No 1999/093, IMF Working Papers from International Monetary Fund

Abstract: A key obstacle to fundamental tariff reform in many developing countries is the revenue loss that it ultimately implies. This paper establishes a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenues, showing that for a small open economy, a cut in tariffs combined with a point-for-point increase in domestic consumption taxes increases both welfare and public revenues. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features as nontradeable goods, intermediate inputs, and imperfect competition.

Keywords: WP; production efficiency; tariff reform; tax reform; intermediate inputs; imperfect competition; reform of the kind; tariff revenue; tariff reduction; revenue function; reform literature; tax-tariff reform; reform design; reducing tariff; Tariffs; Consumption taxes; Consumer prices; Producer prices; Consumption; Africa (search for similar items in EconPapers)
Pages: 20
Date: 1999-07-01
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Citations: View citations in EconPapers (10)

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Journal Article: Coordinating tariff reduction and domestic tax reform (2002)
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