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Revisiting the Relationship between Trade Liberalization and Taxation

Author

Listed:
  • Rabah Arezki
  • Alou Adesse Dama
  • Gregoire Rota-Graziosi
Abstract
This paper explores the dynamic effects of trade liberalization on tax revenue using a worldwide panel dataset. Results point to statistically significant negative effect of liberalization on (non- resource) tax revenues in the short term and no significant effect in the medium term. Liberalization also alter the tax structure tilting revenues toward indirect taxes away from direct ones. Economies which have implemented value added taxes prior to liberalization have mitigated its negative effects on tax revenues. The evidence is supportive of the complementarity role of state capacity to reap the benefits of liberalization.

Suggested Citation

  • Rabah Arezki & Alou Adesse Dama & Gregoire Rota-Graziosi, 2021. "Revisiting the Relationship between Trade Liberalization and Taxation," CESifo Working Paper Series 9244, CESifo.
    • Handle: RePEc:ces:ceswps:_9244
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    References listed on IDEAS

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    More about this item

    Keywords

    tax; tax structure; openness; liberalization; natural resources;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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