The Use and Potential of Export Taxes for Africa: an Introductory Analysis

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The Use and Potential of Export Taxes for Africa: an Introductory Analysis

The Use and Potential of Export Taxes for Africa: an Introductory Analysis

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Working Papers ~ John Stuart

Export taxes have been used as long as international trade has taken place, both as a generator of revenue and also for strategic reasons. However, despite the unambiguously negative (inefficient) nature of export taxes, when viewed from the perspective of global welfare, they continue to be used in world trade, especially among developing and middle income countries.

Export taxes are most popular for primary sectors, which is not unexpected given that these dominate the exports of developing countries, the primary users of the taxes. Sugar, coffee, cocoa, forestry products, fishery products, leather, hides & skins products; and metal & mineral products are the sectors most impacted by export taxes.

Solleder (2013) suggests that the use of export taxes, far from being on the decline, is actually increasing among developing nations. Africa is no exception, and its countries have both historically and currently made use of export taxes as well as simple quantitative export restrictions or outright bans. In fact, African countries dominate other continents in the use of export taxes, with 91% of African countries making use of them, as opposed to Asia – 76% – and the Americas – 71%. Some of the notable countries which do not make use of export taxes are the USA, Peru, Iceland, most of the EU (export taxes are not prohibited vis a vis external trade), Algeria, Libya, Eritrea, Somalia, South Korea, Japan, Australia and New Zealand.

The extent of export taxes among developing and middle income countries is of interest to economists, since the conditions under which an export tax will be welfare-raising are somewhat limited. In fact, the pervasive logic and common sense of Ricardian trade predictions suggest that any form of trade barrier would fail to raise welfare, undoubtedly from a global perspective but also usually from a country perspective as well. Economic theory shows that, for an export tax to be domestically welfare-raising, certain specific conditions relating to the market power of the exporting nation must be met, failing which the tax may raise some revenue, but will ultimately be negative-sum for the exporting country and indeed for the world.

This paper attempts an introduction to an analysis of export taxes for Africa. It starts with a review of theoretical considerations in order to understand the central research question. Next an overview of the historical and current use of export taxes and restrictions in Africa is provided, in order to contextualise the issue. The final section contains a Computable General Equilibrium (CGE) simulation of the use of export taxes in the case of Namibia’s Uranium and Thorium ore exports. Policy implications and some recommendations are drawn out in the conclusion to the paper.


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