Revenue and the Fiscal Impact of Liberalization : The Case of Niger
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World Bank, Washington, DC
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Using data collected during several missions, the author finds that the principal reasons for low revenue mobilization are (1) the adverse fiscal impact of trade liberalization, (2) the defiscalization of agriculture in the 1970s, (3) the collapse of the uranium boom in the 1980s, and (4) the poor record of the VAT in mobilizing revenue. The large reduction in tariffs during the 1980s and 1990s in the context of structural adjustment programs and West African regional integration initiatives had adverse effects on trade tax revenue during the period 1980 2003. But higher import levels after 1994 succeeded in partially mitigating the revenue losses. The experience of Niger shows that without accompanying macroeconomic policies, parallel improvements in tax and customs administration, and success in mobilizing domestic taxes, most notably the VAT, trade reform can have adverse fiscal consequences. Using a SMART model partial equilibrium analysis developed by UNCTAD for researchers and negotiators at multilateral trade rounds, the author simulated three different tariff shocks to test the fiscal and trade implications of additional trade liberalization in Niger. First, the preferred tariff regime in terms of overall fiscal and job creation impact was the harmonized Swiss formula in contrast to a 10 and 15 percent uniform tariff. Second, a possible Regional Economic Partnership Agreement (REPA) between the European Union and l'Union Economique et Monetaire Ouest-Africaine (UEMOA) by 2015 that would abolish duties on EU imports to the UEMOA countries would have negative fiscal effects on Niger of more than 1 percent of GDP, positive effects on trade creation of about 1.5 percent of GDP, and ambiguous effects on local industry. While there will be some welfare gains for consumers and importers from lower import tariffs and the possibility of trade creation, the fiscal losses and adjustment costs would be significant, particularly in the machinery and transport sectors. Third, there are asymmetric gains and losses from regional integration and tariff changes, and a 10 percent uniform tariff would have the greatest impact on Benin and Senegal and some impact on Niger and Togo. In sum, further trade liberalization in Niger will have significant fiscal costs, partially offset by trade creation through increased imports.
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ACCOUNTING, ADJUSTMENT POLICIES, ADVERSE EFFECTS, AGRICULTURE, ARABLE LAND, CAPITAL GOODS, COMMERCIAL POLICY, COMMODITY TAXES, COMPETITIVENESS, CONSUMERS, CUSTOMS, CUSTOMS ADMINISTRATION, DEVALUATION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICIES, ECONOMIC REFORM, ECONOMIC STRUCTURE, ECONOMISTS, ELASTICITY, ELASTICITY OF SUBSTITUTION, EMPIRICAL EVIDENCE, EQUILIBRIUM, EVASION, EXCHANGE RATE, EXPORT DUTIES, EXPORT EARNINGS, EXPORT GROWTH, EXPORT TAX, EXPORT TAXES, EXPORTERS, EXPORTS, EXPORTS OF GOODS, FINANCIAL MANAGEMENT, FISCAL BALANCE, FORECASTS, FREE TRADE, FREE TRADE AREAS, GDP, GNP, GNP PER CAPITA, HUMAN DEVELOPMENT, IMPORT LICENSING, IMPORT RESTRICTIONS, IMPORTS, INCOME, INTERMEDIATE GOODS, INTERNATIONAL TRADE, INVENTORIES, LEVIES, MACROECONOMIC POLICIES, MONETARY POLICIES, MULTILATERAL TRADE, NATURAL RESOURCES, OIL, OPEN ECONOMIES, PARTIAL EQUILIBRIUM ANALYSIS, POLITICAL ECONOMY, POSITIVE EFFECTS, POVERTY LINE, PRODUCERS, PRODUCTION COSTS, PRODUCTIVITY, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE REVIEW, REAL EFFECTIVE EXCHANGE RATE, REFORM PROGRAMS, REVENUE COLLECTION, REVENUE PERFORMANCE, REVENUE SOURCES, SAHARA, SAHEL, SMUGGLING, STRUCTURAL ADJUSTMENT, TARIFF BARRIERS, TARIFF RATE, TARIFF RATES, TARIFF REDUCTIONS, TARIFF REFORM, TAX, TAX RATES, TAX REFORM, TAX REVENUE, TAXATION, TERMS OF TRADE, TIMBER, TRADE BARRIERS, TRADE DIVERSION, TRADE LIBERALIZATION, TRADE POLICY, TRADE POLICY REFORM, TRADE POLICY REFORMS, TRADE PREFERENCES, TRADE REFORM, TRADE REFORMS, TRADE REGIME, TRADE REGIMES, TRADE TAXES, TRANSPARENCY, TREASURY, UNEMPLOYMENT, UTILITIES, WAGES, WELFARE GAINS, WTO