The Fiscal Effects of Tariff Reduction in the Caribbean Community

This paper explores the fiscal effects of tariff reduction for the Caribbean Community.The paper concludes that Caribbean countries are likely to experience short-run revenue shortfall as a consequence of trade liberalization. Indications are that the shortfall could be as much as a 45 per cent decline in customs duties. In order to mitigate this substantial effect, the ongoing efforts at fiscal reform must continue, paying particular attention to lowering tax exemptions, enhancing indirect tax systems, improving tax collection and administration and modifying the tax structure to reflect lower dependence on trade taxes for fiscal receipts.