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WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.

English

Tying Governments' Hands in Commodity Taxation

In the 1970s, taxation of "windfall" profits from primary products and intervention in trade and production tempted governments into expansionary fiscal policies, whilst stifling the private sector and depressing growth. However, the experience of the recent coffee boom has so far been more favourable: those African countries which liberalized and left a large share of the “windfall” with the private sector, and which committed themselves to fiscal austerity via adjustment programs have shown better results in terms of fiscal stability, private sector responses and economic growth than countries which did not reform. These findings suggest that constraints on discretionary government policies are desirable, and that domestic institutions and international commitments could serve this purpose.

English

Keywords: savings and investment, Commodity booms, terms of trade, public expenditure, Africa, fiscal policies, export taxes, political economy
JEL: F13: International Economics / Trade / Trade Policy; International Trade Organizations; H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / Fiscal Policies and Behavior of Economic Agents: General; E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy; O55: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Africa
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