Tariff and Consumption Tax Reforms in a Developing Tourism Economy |
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Authors: | Hamid Beladi Chi-Chur Chao Jean-Pierre Laffargue |
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Institution: | 1. Department of Economics, University of Texas at San Antonio, San Antonio, TX 78249-0633, USAhamid.beladi@utsa.edu;3. Department of Economics, Deakin University, Melbourne, Australia;4. Department of Economics, University of Paris I and CEPREMAP, Paris, France |
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Abstract: | This paper examines the effects of a coordinated tax reform by replacing import tariffs with point-by-point increases in consumption taxes for a small-open developing tourism economy. Foreign tourists demand for the non-traded goods provided in the informal sector of the host economy, resulting in a tourism-induced terms-of-trade effect. The presence of inbound tourism lends a support to positive tariffs even for a small open economy. The indirect tax reform of this kind can increase residents’ welfare and government revenue when the initial tariffs are relatively larger to the consumption taxes. |
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Keywords: | Tariffs consumption taxes tourism |
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