Template-type: ReDif-Paper 1.0
Author-Name: Backhaus J.G.
Author-workplace-name: METEOR
Title: Incentive Taxation and Sustainable Growth in the Third World: The Case of Tehran
Abstract: The judicious use of natural resources is a crucial prerequisite for sustainable growth not only in developed countries, but even more so in the Third World. To a substantial degree, natural resource use is determined by the tax structure governing a country''s economic activity. When a tax constitution can be designed which stimulates the judicious use of natural resources, an important step towards achieving sustainable growth has been made. Designing such a constitution is not a simple task, however. For third world countries, the task is further complica ted by at least three factors. On the one hand, the tax system has to be exceedingly simple, since both number and quality of tax instruments available to third world governments tend to be limited. Secondly, the legal system tends to mirror the state of economic development. This limits not only the tax structure an economy can bear; it also limits a government''s ability to regulate natural resource use by legal means. Thirdly, the more elaborate a legal system, the more diversity it affords its country for economic activity, including opportunities for the division of labour. The essay has eight sections. It starts with the discussion of the use of the environment and the natural resource endowment from the point of view of public finance theory. This point of departure is central, as it serves to identify the net product (le produit net) of economic activity after full consideration of the use of natural resources in the process of production. From this point of view, the question of what constitutes spillover effects or externalities in a market economy can be seen in the broad public finance perspective developed in section two. Section three discusses some standard problems in designing a tax constitution for a third world country. Section four explores possibilities for creating a framework in which the sustainable use of the natural resource endowment can take place. Central to the sustainable use is the notion that the environment has to be put to different uses, which raises the issue of the reversal of use dealt with in section five. The possibilities of ensuring reversibility of the use of natural resources is discussed in section six and a specific procedure is developed which is designed to ensure that reversibility of use can be achieved with simple administrative means, i.e. means that are available to third world governing authorities. The essay ends with some concluding observations. 
Keywords: economic development an growth ; 
Series: Research Memoranda
Creation-Date: 1998
Number: 010
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:b25a87fc-6118-4967-a9d8-453eb042727c/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 73785
Handle: RePEc:unm:umamet:1998010