De-linking the Relationship between Trade Liberalization and Reduced Domestic Fiscal Budgets: The Experience of the Israeli Economy: 1984-2005
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Joseph Pelzman
Issues concerning the consequences of trade liberalization and the resulting reduction in domestic fiscal budgets have always been the 'hot' topic in the trade policy community. This paper approaches this issue by focusing on the experience of the Israeli economy in the twenty year period (1984-2005) where Israel undertook both major tariff liberalization and a related domestic tax reform, with no reversion to border taxes. The Israeli experience highlights the initial budget revenue concerns associated with tariff liberalization, and quickly moves the issue away from border tax substitutes to domestic issues concerning enforcement. By de-linking the two issues the paper demonstrates that it is feasible to successfully tackling both external and internal tax reforms. Furthermore, it demonstrates that it is possible not to fall into the trap of looking at border taxes as a cure for internal high costs of tax revenue. The appropriate prescription for other developing or newly industrialized countries is to de-link the two tax issues, focus on the collection side of the domestic tax structure while at the same time reducing local taxes and broadening the tax base.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Is There an East European Housing Bubble?
- De-linking the Relationship between Trade Liberalization and Reduced Domestic Fiscal Budgets: The Experience of the Israeli Economy: 1984-2005
- Trade Agreements and the Environment: An Industry Level Study for NAFTA
- Foreign Direct Investments and Productivity Growth in the Agri-Food Sector of Eastern Europe and Central Asia: An Empirical Analysis
- Antidumping Procedures and Macroeconomic Factors: A Comparison between the United States and the European Union
- Long-Run Inflation and Exchange Rates Hedge of Stocks in Brazil and Mexico