Trade Taxes Research Articles

China’s embodied energy trade: based on hypothetical extraction method and structural decomposition analysis

ABSTRACTIn this paper, we employ multi-region input–output model to investigate China’s embodied energy trade in 1995–2009, and then we use hypothetical extraction method to explore the effect of Chinese foreign trade on the other countries or regions of the world after extracting the trade volume between China and the world. We find that China was a net export country of embodied energy, and there was pronounced discrepancy between the sectors in importing and exporting embodied energy, where the sector Electrical and Optical Equipment had the largest import and export in embodied energy. In 2009, China imported mainly from Korea and exported mainly to Japan.In addition, extracting trade from China and other countries not only influenced the embodied energy consumption of China but also consumption and trade of other countries. China’s government should pay more attention to sector differences when adopting policies like trade tax rate, and enhance cooperation with other countries.

Opinion Statement FC 7/2018 on a Proposal for a Council Directive Amending Directive 2006/112/EC, as Regards the Introduction of Detailed Technical Measures for the Operation of the Definitive VAT System for the Taxation of Trade between Member States (2018/0164(CNS))

This CFE Opinion Statement concerns the EU proposal to amend the VAT Directive to introduce detailed technical measures for the operation of the proposed definitive VAT system. In this Statement, the CFE sets out its concerns regarding the practical implications of introducing “Certified Taxable Persons” and the potential impact of the proposed Directive on SMEs, call-off stock and chain transactions, reverse charge supplies and the special schemes extending the one-stop account for VAT.

Using Markov-Switching models in Italian, British, U.S. and Mexican equity portfolios: a performance test

In this paper we test the use of Markov Switching models in equity trading strategies, following Brooks and Persand (2001), Kritzman et al. (2012) and Hauptmann et al. (2014), who suggest their use as warning systems of bad performing periods. We extend their reviews by testing again (with the impact of trading fees) the U.S. and U.K. markets and by extending our tests to the Italian and Mexican case. The rationale behind our Markov-Switching strategy is to invest in equity index tracking ETFs in low volatility or ”good performing” periods and in the local risk-free asset in high-volatility or ”bad performing” ones. Our results show that in a weekly simulation from January 4, 2001 to July 30, 2017 with a 0.35% trading fee plus taxes, our system is useful to create alpha in all the simulated markets even if the Italian case showed several deep distress moments due to a financial or political crisis.

How Illegal Trade Responds to Tariffs, When Importers Can Avoid: Evidence From Iran

While import taxes are easier to levy, there is increasingly more evidence that importers engage in trade tax evasion. The literature uses, trade gap, the difference between reports from the two ends of a trade link, as a proxy for illegal imports. Many papers have found a robust positive correlation between statutory import tax rates and trade gap. However, like any other tax, importers could avoid paying import duties through legal provisions. Such opportunities are abundant in Iran and could bias the evasion elasticity downward. Using disaggregated trade reports from 21 partners and Iran Customs Administration from 2004 to 2013, we show that a one-percentage-point increase in tax rate is significantly associated with a 1.8 percent increase in trade gap. But once we control for avoidance, this effect increases to 2.5 percent. In line with our expectation, there is also a significant negative correlation between our avoidance proxy and trade gap.

Tax revenues and the fiscal cost of trade liberalization, 1792–2006

This article examines the impact of trade liberalization on government revenues. Using a new dataset on tax revenues for 130 countries between 1792 and 2006, we identify ninety-nine episodes of trade liberalization defined as a large fall in trade tax revenues not accompanied by a decrease in trade. Seven took place before World War One, seven in the interwar period, eighteen in the Bretton Woods period and the remainder after 1970. We examine the extent to which countries were able to recover the tax revenues lost by liberalizing trade by using other sources of revenue. We find that historical (pre-1970) trade liberalization episodes were unlikely to be accompanied by decreases in tax revenues, especially during the Bretton Woods era. In the recent period however, over 40% of the developing countries in our sample experience a fall in total tax revenues that lasts more than ten years after an episode of trade liberalization. Overall, trade liberalization led to larger and longer-lived declines in tax revenues in developing countries since 1970 than in today’s rich countries in the 19th and 20th centuries. Results are similar when we consider government expenditures, suggesting decreases in trade tax revenues negatively affect governments’ capacity to provide public services in many developing countries.

The Impact of Trade Liberalization on Health: Evidence from Pakistan

The literature predicts both positive and negative health outcomes in developing economies as a result of increasing trade. Does openness to trade help to improve health indicators in the case of Pakistan? This study attempts to answer this question using data from 1975 to 2016. This study uses life expectancy and infant mortality as health indicators while trade to GDP ratio as trade openness indicator. For robustness analysis, the study uses international trade taxes, exports to GDP ratio and imports to GDP ratio. The empirical results of the study show that 1% increase in trade to GDP ratio significantly decreases life expectancy by 0.05 years and significantly increases infant mortality by 0.47 deaths. Thus, trade causes adverse effects on health indicators in the case of Pakistan.

Trade Liberalization-Trade Revenue Nexus: An Empirical Enquiry of Trade Laffer Curve of Pakistan

This study tries to explore the trade revenue implication of trade liberalization for Pakistan. Laffer curve approach is used to see the non-linear relationship between trade openness and trade tax revenue. Empirical evidence shows that trade openness has constructive impact on trade tax revenue in linear term. The non-linear relationship has also been explored in the presence of other macroeconomic variables. The marginal impact of non-liner squire trade liberalization has adverse effect on trade tax revenue. In the long run, the empirical investigation proves the existence of inverted U-shaped behavior between trade liberalization and trade tax revenue in Pakistan but this behavior does not exist in short run.

Export Product Diversification and Public Revenue’s Dependence on Resource Revenue

ABSTRACTThis article tries to reconcile two major priorities for countries, notably resource-rich countries on the international development agenda: export product diversification with a view to helping them better integrate into the multilateral trading system and tax reforms with a view to reducing the dependence of total public revenue on resource revenue, and therefore developing a more sustainable stream of public revenue. The analysis therefore involves examining empirically the impact of export product diversification on countries’ overall public revenue dependence on resource revenue, this dependence being measured by the share of resource revenue in total public revenue. The empirical analysis shows that export product diversification exerts a negative and significant impact on resource revenue share of total public revenue, and therefore could help facilitate tax reforms towards lower resource revenue dependence. Hence, while tax policy is the main policy tool to conduct tax reforms, export product diversification would likely contribute to facilitating the implementation of these reforms.

ГРУППЫ ПРОМЫСЛОВЫХ ЗАНЯТИЙ ПО ОБРАБОТКЕ ВОЛОКНА И ЖИВОТНОЙ ПРОДУКЦИИ В АРЗАМАССКОМ УЕЗДЕ ВО ВТОРОЙ ПОЛОВИНЕ XIX - НАЧАЛЕ XX В.

The article considers the non-agricultural crafts related to processing of fiber and animal products. The mentioned crafts were popular among the population of Arzamas district in the second half of the XIX century, which is testified by the researches of handicraft industry. Both natural-geographical and historical factors influenced considerably the formation of the mentioned crafts. The “Statue on State Trade Tax”, which was adopted at the end of the XIX - the beginning of the XX century, did not have a negative impact on the analyzed branches. On the contrary, the author concludes that the changes in the normative and legal basis stimulated further development of the small-scale enterprises engaged in processing of fiber and animal products.

A Hitchhiker's Guide to the OECD's International VAT/GST Guidelines

The OECD’s International VAT/GST Guidelines, which were released in their consolidated form at the OECD’s Global Forum on VAT in Paris in late 2015, are the culmination of nearly two decades of efforts to provide internationally accepted standards for consumption taxation of crossborder trade, particularly trade in services and intangibles. For an American tax journal, however, even one that regularly publishes articles addressed to international taxation, an article on VAT may seem to be an odd choice of a topic. After all, American exceptionalism continues to inform national tax policy, leaving the United States as the only country in the OECD (and among the overwhelming majority of countries worldwide) without a VAT. Nor does the United States have any other general consumption tax as part of its national tax structure. Moreover, even if one takes the liberty of describing the American subnational retail sales tax (RST) as a consumption tax, there are significant structural differences between the American single-stage RST and the multiple-stage collection process that defines the VAT, thus limiting the relevance of many VAT issues to the American consumption tax regime. Finally, and perhaps most fundamentally, there is the perception in international tax circles that the problems associated with income taxes are intellectually more challenging and thus more worthy of attention than those associated with VATs––problems that are often viewed as involving little more than cash-flow management.

Tax structure and economic growth in Jordan, 1980-2015

PurposeThe purpose of this paper is to analyze the impact of tax structures on economic growth in Jordan over the period 1980-2015 using error correction techniques. It provides empirical evidence that the tax structure itself, comprising direct taxes, indirect taxes and total tax revenues, is an insufficient indicator for policymakers, whereas when each tax was included separately in the model, it was found that income tax, corporate taxes and personal taxes influenced per capita income growth negatively and that all of them were distortionary taxes. They greatly reduced both short and long-term per capita growth, while tariffs and consumption taxes were found to influence per capita income growth positively. The study also shows that relying heavily on increasing total taxes without taking into consideration the tax structure of the country would lead to a reduction in per capita income, in contrast to other tax structures that showed positive and neutral effects on per capita income. Tax reform and shifting from income taxes toward consumption taxes and tariffs would therefore enhance the well-being of individuals and increase their share of output.Design/methodology/approachThis study uses an analytical approach in the framework of an error correction model. This approach allows us to overcome many problems in time series data such as non-stationary, serial correlation and endogeneity of variables, which have been ignored in many published studies dealing with time series data.FindingsThe analysis shows that consumption and tariffs have a positive effect on per capita gross domestic product growth, whereas income taxes negatively influenced this growth measure. This implies that attention must be paid to a preference for consumption and tariffs to provide sustained growth. The authors recommend that the government objective should shift from raising revenues to achieving social justice and efficiency.Research limitations/implicationsThere are two main limitations inherent this study. The first limitation in regard to the missing data in the series for labor force and average years of schooling, interpolation method used to overcome this shortage. While the second limitation is about the importance of the tax structure itself and its direct impact on such patterns of investment which have been considered but within narrow limits.Practical implicationsThe relationship between taxes and economic growth is a controversial aspect of economics, because of its high impact on the decisions made by individuals and institutions, along with its direct influence on the economy as a whole. The authors recommend that the Jordanian government’s objective should shift from raising revenues to achieving social justice and efficiency. Furthermore, Jordan’s weak tax performance and ineffective tax structure indicate the importance for policymakers of focusing more closely on enhancing future per capita growth, which can be done by shifting from income tax toward consumption and trade taxes. On another level, policymakers can reform the tax structure in favor of long-run growth by addressing the importance of consumption taxes and trade taxes in their policies, rather than increasing tax rates.Social implicationsThe character of growth is more important than its magnitude. Economic growth should be reflected in the alleviation of poverty reduced inequality and ultimately better living standards. Additionally the authors believe that sustained economic growth can be achieved only if it is broadly based and inclusive. This implies the need to generate jobs for the growing workforce and the adoption of policies to protect and cater for the vulnerable segments of the population. Otherwise economic policy will fail to achieve its objectives.Originality/valueThis study assists policymakers in understanding the relationship between the various types of taxes and economic growth. In particular, the relation between the unique tax structure and growth drivers. This is the first study to analyze tax structure and economic growth in Jordan.

Tax Structure and Developing Countries

Abstract The main source of public revenue compared to other sources are Taxes, as in developed countries and developing countries, therefore the tax system has an extraordinary role in sustainable economic development and employment growth. Also, tax policy that acts in a complementary way to monetary policy is of vital importance also due to the preservation of economic stability by limiting the level of inflation and balancing the equilibrium on the market. The main purpose of this paper is to explore the tax structure in developing countries and their comparison with developed countries. In this paper some tax theory will be discussed. It will also be shown for impractical research and their effects on economic development and the growth of social welfare. Although there is no consensus among researchers, most empirical studies show a negative link between public spending and economic growth. However, in order for the tax effects to be the highest in the economy in developing countries, the international trade tax and the VAT should be replaced rather within the country.

Tax Structure and Developing Countries

The main source of public revenue compared to other sources are Taxes, as in developed countries and developing countries, therefore the tax system has an extraordinary role in sustainable economic development and employment growth. Also, tax policy that acts in a complementary way to monetary policy is of vital importance also due to the preservation of economic stability by limiting the level of inflation and balancing the equilibrium on the market. The main purpose of this paper is to explore the tax structure in developing countries and their comparison with developed countries. In this paper some tax theory will be discussed. It will also be shown for impractical research and their effects on economic development and the growth of social welfare. Although there is no consensus among researchers, most empirical studies show a negative link between public spending and economic growth. However, in order for the tax effects to be the highest in the economy in developing countries, the international trade tax and the VAT should be replaced rather within the country.

Tax Structures and Economic Growth: New Evidence from the Government Revenue Dataset

AbstractThis study uses the ICTD UNU‐WIDER Government Revenue Dataset in order to challenge and extend existing findings on the relationship between tax structures and economic growth, in a panel of 100 countries. The results suggest that, broadly, revenue‐neutral increases in income taxes are associated with lower long‐run GDP growth and that revenue‐neutral reductions in trade taxes have not always had positive effects. Crucially, many of the results presented differ according to income level, calling into question the validity of existing findings for developing countries and suggesting that policy advice on this issue in developing countries should be viewed through a more cautious lens. © 2018 UNU‐WIDER. Journal of International Development published by John Wiley & Sons, Ltd.

Endogenous trade policy in general equilibrium: An interaction of redistribution rule, trade openness, and labor market condition

Using a general equilibrium framework, the paper derives trade policy endogenously for a small country. It shows that, contrary to the existing literature, a lobbying industry is not guaranteed trade protection; it may even face trade taxes. Besides lobbying, trade policy depends on other factors such as the trade revenue distribution rule, income distribution across groups, trade openness, factor substitutability in production, industry employment size, and labor market flexibility. The paper also shows that the observed phenomenon of government preference for import tariffs over export subsidies—a long overdue puzzle—is an inherent outcome of lobbying equilibrium. It also shows that trade policies such as import tariffs and export taxes that have the same impact on economic market—Lerner symmetry (1936)—are driven by the same forces in the political market.

Implementing Momentum: What Have We Learned?

An abundance of academic evidence and theory exists on the efficacy and intuition behind momentum investing, yet a limited number of studies discuss the feasibility of running momentum portfolios in practice. And no study to date has directly analyzed implementation costs for a live momentum portfolio. As a result, many are still quick to dismiss momentum as difficult or costly to implement because of its high turnover. In this paper, we use seven years of live data to evaluate the implementability of momentum investing. We show that live momentum portfolios are capable of capturing the momentum premium, even after accounting for expenses, estimated trading costs, taxes, and other frictions associated with real-life portfolios.

Revenue Implications of Continental Free Trade Area: A Malawian Perspective

The study estimates the tax revenue implications of Malawi joining the Continental Free Trade Area (CFTA) using a traditional buoyancy Model on disaggregated trade data. The results show that African imports have a positive impact on Malawi’s trade taxes. The results further show that Malawi is likely to benefit from joining the CFTA through trade creation effects. However, revenue losses are imminent and more pronounced for capital goods. Hence, the study recommends that Malawi should join the CFTA and liberalize while keeping 15 percent of tariff lines for sensitive products and excluded products over a period of 10 years. To minimize the negative revenue impact, the exclusion list should contain a significant amount of capital goods.

What’s Left to Tax? Partisan Reallocation of Trade Taxation in Less Developed Countries

Trade liberalization has reduced trade tax revenue in most less developed countries (LDCs). The options to replace this tax, which has historically been LDCs’ primary source of tax revenue, are limited by competitive pressures in the global economy. Using time-series error correction models, we assess how partisan politics shaped the reallocation of taxes in thirty-eight LDCs from 1975 to 2009. We argue that leftist governments have a vested interest in recovering lost revenue to fund spending that benefits their constituencies but they are highly constrained by the market signaling effects of increasing taxes. We find that leftist governments retained higher levels of falling tax revenue and offset trade tax losses with progressive personal income taxes (PITs). Nonetheless, leftist governments appeared reluctant to increase revenue from corporate income or social security taxes, which impose costs on business. To make up for the trade revenue loss, leftists instead relied more heavily on regressive consumption taxes, which are the most lucrative and market-friendly supplements to preferred PIT. Leftist parties in LDCs demonstrate redistributive concerns, but their tools and the lasting effects of their reforms are limited by strong market constraints.

Revenue-Generating Potential of Taxation for Older-Age Social Pensions

Social security and taxation operate jointly to overcome individual deprivations, reduce income inequality and promote development, bringing ‘taxation into social protection analysis and planning’. There are several ways in which governments can create fiscal space to finance social protection programmes (e.g. social pensions). The idea is to create new sources of revenue –sustainable in the long-run – which can be used to finance social pensions, without building new liabilities and without distorting macroeconomic stability. The literature specifically addressing the potential fiscal space that could be created to finance social pensions is limited. This paper aims to begin filling some of those gaps and identify sources for creating fiscal space for social pensions through the revenue side (i.e. examine the revenue-generating potential of taxation for social pensions). Specifically, examine the potential funding power of three types of taxes (income tax, corporate tax, and trade tax) using cross-country tax revenues and tax rate data in a global perspective. The paper demonstrates that the three taxes have a revenue-generating potential to finance social pensions in several countries. There is not a magic prescription useful for every country, but there are numerous options to design a tailored mix of sources to create fiscal space.

Assessing the Extent and Impact of Illicit Financial Flows in the Wildlife and Tourism Economic Sectors in Southern Africa

This study on Illicit Financial Flows (IFFs) in the Wildlife and Tourism sectors in Southern Africa emanated from the TrustAfrica (TA) and the Open Society Initiative for Southern Africa (OSISA) project “Assessing the extent and impact of illicit financial flows in key economic sectors in Southern Africa”. The three components of the project are mining, agriculture and wildlife. IFFs are illicit movements from one country to another of money or products that are illegally acquired. The money typically originates from three sources in the private sector: commercial tax evasion, trade misinvoicing and abusive transfer pricing. However, other types of criminal activity can produce IFFs, which in this study include the trafficking of live animals and plants and their products and associated corruption (bribery and theft by corrupt government officials) through which the proceeds end up in another country. This wildlife trade and tourism IFF study is the first of its kind and the methodologies involved a combination of population modelling, estimated product offtakes and open source trade data. The trade research is limited to eight species groups – elephants, rhinos, lions, pangolins, crocodiles, abalone, sharks and rays, and cycads. The study concluded that for the period 2006-2014, Southern Africa lost almost US$ 1.5 billion in illicit transfers of funds or products overseas, or close to 50% of all wildlife commodity exports. Surprisingly, illegal exports of abalone meat made up almost half of this amount. The IFFs in the wildlife tourism sector were much larger, estimated at over US$ 22 billion in the ten years 2006-2015, and deriving mainly from tax evasion and trade misinvoicing, sometimes involving offshore shell companies. We predicted that more than US$3 billion could have been lost in 2016 in the eight countries covered in this study. The main causes of the huge losses to the economies of Southern Africa in wildlife trade were CITES trade bans and the fact that local communities were not empowered to manage what should rightfully be their resources on their land. Trade bans and disenfranchisement led communities to harvest illegally and to sell wildlife products to illegal exporters. The only way to mitigate these losses would be to do away with trade bans, bring most species into the legal sector, and establish supply and demand regulatory systems that would ensure conservation of the species while also satisfying legitimate stakeholder interests, primarily those of communities and enterprises that live in association with the wildlife and which share common habitats.