WTO Membership and the Shift to Consumption Taxes

42 Pages Posted: 12 Oct 2016  

Thiess Buettner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Boryana Madzharova

FAU

Date Written: August 17, 2016

Abstract

Using a panel of 97 mostly developing and transitional countries for the period 1990-2011, this paper explores fiscal implications of membership in the World Trade Organization (WTO). Employing robust difference-in-difference specifications as well as semi-parametric methods, we find that countries joining the WTO experience a decline in revenues from import duties between 0.5% and 1% of GDP. Revenue losses from import duties are more than compensated for by an increase in consumption taxes. Although triggered by WTO accession, the shift towards consumption taxes, in particular to VAT, typically takes place before trade liberalization commitments result in declining tariff revenues.

Keywords: trade liberalization, tax reform, value added tax, GATT, WTO, anticipation effects, synthetic control group method

JEL Classification: H200, F130

Suggested Citation

Buettner, Thiess and Madzharova, Boryana, WTO Membership and the Shift to Consumption Taxes (August 17, 2016). CESifo Working Paper Series No. 6052. Available at SSRN: https://ssrn.com/abstract=2851361

Thiess Buettner (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Lange Gasse 20
Nürnberg, Bavaria 90403
Germany

Boryana Madzharova

FAU ( email )

Lange Gasse 20
Nuernberg, D-90403
Germany
+49 911 5302-203 (Phone)

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