Export tax rebates and welfare

Abstract

The paper explores the welfare implications of a fiscal policy for trade expansion which is widely used by many countries. The preferential taxation of exports and of factors employed in their production can be regarded as a move towards the destination principle of taxation, but an imperfect and biased one, increasing the volume of trade and often reducing economic welfare. The present analysis is an extension of the relevant theory of trade and distortions in the field of fiscal incentives for trade (export) expansion, (CORDEN, 1974).