Rationalizing tax subsdies for mechandize export development: rational reconstruction approach

Abstract

This research was premised on rationalizing tax subsidies for merchandize export development in Zimbabwe since it is a resource endowed nation with huge mineral deposits and large tracts of arable land for farming. The ultimate goal is to improve export performance by capitalizing on these low hanging fruits. However, some researchers believe that tax subsidies are a leakage in the circular flow of income while others believe that exports have a chance to improve in the absence of stringent tax rules and regulations that confine tax payers to pay more than they are supposed to pay. This is also out of the idea that revenues are the resource pool for all expenditure needs and rationalizing tax subsidies appears to be the plausible option to equate the balance between revenue and expenditure. The research covered the period from 1985 to 2020 using the data from the World Bank. The findings revealed that there is positive relationship between tax subsidies and merchandize exports. The findings also revealed that tax subsidies do not work in isolation and their effectiveness depend on other factors which the implementing country may not be privy to. Value addition should be emphasized and underlined as it is the cornerstone of international trade. It is also important to underscore that tax subsidies thrive under bilateral relationships where two countries forge a trade relationship meant to address their needs.