IMF paper shows liberalization has eroded poor countries’ revenue base

4 February 2005

In September 2004, the IMF issued a draft paper entitled "Tax Revenue And (Or?) Trade Liberalisation" presenting the findings of a study which showed that the reduction in tariffs and taxes over the past two decades, as well as other trade-related reforms, have eroded countries’ revenue bases, resulting in a net loss in income for the poorest countries. The paper finds that low-income countries have recovered essentially none of the revenues lost to trade tax reductions and other liberalization measures, and that VAT has not been successful in making up for lost revenues: "Low income countries, most starkly still, recover almost nothing: revenue losses from trade liberalization have been permanent."

Read the report:

Tax Reform and(or?) trade liberalization? http://www.imf.org/External/np/res/seminars/2004/tbmk.pdf