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Border Tax Adjustments and Tariff-Tax Reforms with Consumption Pollution

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  • Nikos Tsakiris
  • Panos Hatzipanayotou
  • Michael S. Michael

Abstract

We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first-best policy combination calls for consumption taxes on all polluting goods, and Border Tax Adjustment (BTA) measures, i.e., tariffs or import subsidies. We identify conditions under which well known tariff-tax reform policies for developing economies, such as a consumer-price-neutral piecemeal reform of a trade and a consumption tax, and a consumer-price-neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether a consumer-price-neutral reform of a tariff and a consumption tax is superior to a reform of a tariff alone.

Suggested Citation

  • Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2018. "Border Tax Adjustments and Tariff-Tax Reforms with Consumption Pollution," University of Cyprus Working Papers in Economics 17-2018, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:17-2018
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    References listed on IDEAS

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    Cited by:

    1. Yasushi Kawabata & Yasuhiro Takarada, 2023. "Greening Trade Agreements Through Harmonization of Environmental Regulations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(1), pages 57-81, October.
    2. Michael S. Michael & Panos Hatzipanayotou & Nikos Tsakiris, 2023. "Can Small Economies Act Strategically? The Case of Consumption Pollution and Non-tradable Goods," DEOS Working Papers 2312, Athens University of Economics and Business.
    3. Yasuhiro Takarada & Yasushi Kawabata & Akihiko Yanase & Hiroshi Kurata, 2020. "Standards policy and international trade: Multilateralism versus regionalism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1420-1441, September.
    4. Lai, Yu-Bong, 2024. "Policy linkages, country size, and international capital distribution," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    5. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    6. Haitao Cheng, 2023. "Consumption pollution and taxes with endogenous firm locations and different market sizes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1601-1632, December.
    7. Rabah Amir & Joana Resende & Bernard Sinclair‐Desgagné, 2020. "Introduction to the thematic issue on “Regulation in health, environmental and innovation sectors”," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1740-1745, December.
    8. Takumi Haibara, 2023. "Three tax reforms with and without public pollution abatement," Economics Bulletin, AccessEcon, vol. 43(1), pages 574-582.
    9. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.

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    More about this item

    Keywords

    Consumption generated Pollution; Optimal Taxation; Border Tax Adjustments; Trade and Consumption Tax Reforms;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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