Trade Policy Reform and the Missing Revenue†

In many African countries, large discrepancies exist between revenues implied by published tariff rates multiplied by estimated import volumes and actual receipts. We develop a stylised trade model where average and marginal tariff rates diverge and incorporate insights from this model into a computable general equilibrium model of an African economy (Mozambique) to study the implications of trade policy reform. Model simulations indicate that lowering tariff rates and reducing duty-free importation in a manner that maintains official revenue benefit nearly everyone. The main exception is those who benefited from duty-free imports in the base. Copyright 2008 The author 2007. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.