3.3.2 Effects on Government Revenue
Trade facilitation may also have a positive effect on government revenue. First, customs modernization will likely lead to a more efficient and reliable collection of trade taxes. Engman (2005) surveys some country case studies that suggest that trade facilitation does indeed have a positive effect on customs revenue collection. Second, to the extent that trade facilitation increases the value of trade flows, the tax base will also increase. Both these effects may be particularly important for developing countries, which rely on trade taxes to raise government revenue, often to a larger extent than developed countries. Third, in the long run, government revenue may also be affected through changes in the domestic production following increased trade.