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Tariff policy and taxation in developing countries

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  • Balassa, Bela

Abstract

Developing countries are well advised to adopt appropriate tariff and tax policies. An ideal scheme of such policies would include the following : 1) export taxes should be set on the basis of the long run elasticity of foreign demand in the case of commodities in which the country has market power and at a rate to ensure that exportable production equals the quota when export quotas are applied, 2) import tariffs should be set at equal rates on all manufactured goods, complemented by taxes on their primary inputs, to ensure equal effective rates of protection at desirable levels, preferably not exceeding 10 percent. Primary activities and exports in general should be exempted from tariffs on their inputs. 3) Value added taxes should be levied on all commodities at equal rates, supplemented by excise taxes on luxury commodities and on commodities that create negative consumption externalities.

Suggested Citation

  • Balassa, Bela, 1989. "Tariff policy and taxation in developing countries," Policy Research Working Paper Series 281, The World Bank.
    • Handle: RePEc:wbk:wbrwps:281
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    References listed on IDEAS

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    1. Mantel, Rolf R. & Martirena-Mantel, Ana M., 1986. "On the uniformity of optimal tariffs," Journal of Development Economics, Elsevier, vol. 21(1), pages 41-52, April.
    2. Atkinson, A. B. & Stiglitz, J. E., 1972. "The structure of indirect taxation and economic efficiency," Journal of Public Economics, Elsevier, vol. 1(1), pages 97-119, April.
    3. Clarete, Ramon L. & Whalley, John, 1987. "Comparing the marginal welfare costs of commodity and trade taxes," Journal of Public Economics, Elsevier, vol. 33(3), pages 357-362, August.
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    Cited by:

    1. Veenendaal, Paul J.J., 2007. "The EU-ETS and existing energy taxes," Conference papers 331606, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Panagariya, Arvind & Rodrik, Dani, 1993. "Political-Economy Arguments for a Uniform Tariff," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 685-703, August.
    3. Christian E. Weller & Manita Rao, 2008. "Can Progressive Taxation Contribute to Economic Development?," Working Papers wp176, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Mitra, Pradeep, 1990. "The coordinated reform of tariffs and domestic indirect taxes," Policy Research Working Paper Series 490, The World Bank.
    5. Sonmez, Yontem & McDonald, Scott, 2011. "Cyprus-UK Migration Corridor: Economic Implications of Remittances," Conference papers 332134, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Shafaeddin, Mehdi, 2009. "Impact of Selectivity and Neutrality of trade Policy Incentives on Industrialization of Developing Countries; Implications for NAMA Negotiations," MPRA Paper 15037, University Library of Munich, Germany.
    7. Yoshitomo Ogawa, 2009. "The Welfare Effects of Differential Tariff Rates," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 348-355, May.
    8. Panagariya, Arvind, 1990. "How should tariffs be structured?," Policy Research Working Paper Series 353, The World Bank.

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