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Using Taxes to Deter Illegal Fishing in ITQ Systems

Author

Listed:
  • Hugo Salgado

    (Universidad de Talca)

  • Carlos Chávez

    (Universidad de Concepción Victoria 471, Barrio Universitario)

Abstract

We study the effects of different tax schemes used in fisheries management in combination with an individual transferable quota system. We focus on the effects of taxes on equilibrium quota prices and on violations under the assumption that enforcement to induce compliance is imperfect and costly. The use of taxes is motivated by the regulator’s need to recover costs for enforcement activities. We propose the use of a tax on the price of the processed products based on its impact on violations and the information that is required to implement it. We also show that this tax has a double pay-off for enforcement because it reduces the demand for illegal fishing and increases revenue for enforcement activities without producing a deadweight loss in the quota market. We present an application of our model to the case of the red shrimp fishery in Chile. In our simulation example, a tax of 7 % on the price of fish exports could sufficiently reduce harvest demand and generate enough funding to completely eliminate quota violations, which, in the absence of taxes, can be more than 100 % of the total allowable catch. At the same time, this tax could increase the equilibrium quota price by 19 %.

Suggested Citation

  • Hugo Salgado & Carlos Chávez, 2016. "Using Taxes to Deter Illegal Fishing in ITQ Systems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 709-724, August.
    • Handle: RePEc:kap:enreec:v:64:y:2016:i:4:d:10.1007_s10640-015-9895-z
    DOI: 10.1007/s10640-015-9895-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Taxes; Enforcement; Illegal fishing; Individual transferable quotas;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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