著者

OGAWA Yoshitomo HOSOE Nobuhiro

出版者

GRIPS Policy Research Center

雑誌

GRIPS Discussion Papers

巻号頁・発行日

vol.18-06, 2018-08

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Given that tariffs continue to serve as a primary source of government revenue in many developing countries, we analyze the optimal indirect tax problem, consisting of commodity taxes and tariffs, under a revenue constraint. This study derives the revenue-constrained optimal commodity taxes and tariffs in both a small and a large country and then examines their structure and properties. We show that the optimal commodity tax structure follows the Ramsey rule regardless of whether a country is small or large, which implies that the same optimal commodity tax rules are applied across a range of situations. We also show that the optimal tariffs are not zero, but negative, even in the small country case, which implies stronger support for the World Bank’s recommendation of tariff reductions for a country facing a revenue constraint. In addition, this study analyzes the optimal commodity taxation when tariffs cannot be fully adjusted. Numerical examples demonstrate some of our major findings and the welfare gain of the optimal taxation for a few developing countries.