Bolivia

Bolivia successfully adopted an open market economy model in 1985; however, economic growth and employment generation have been insufficient for the country to make headway in narrowing its sizable inequalities in incomes and standards of living. In an effort to address these issues, the Bolivian authorities pursued a comprehensive economic reform program that included modernization of the customs administration.

Trade Policy and Taxation

In 1985, Bolivia launched significant reforms in the area of international trade that included reducing tariffs and simplifying controls. Initially the authorities introduced a uniform tariff of 20 percent for capital and other goods, but the tariff schedule is no longer uniform, because in 1987, the authorities further reduced the tariff on capital goods to between zero and 5 percent and lowered the tariff on other goods to 10 percent.

In addition to customs duties, levies on imports include a value added tax of 14.9 percent and a selective consumption tax that ranges from 50 percent on cigarettes and other tobacco products to between 10 and 18 percent on automobiles. Other taxes include a specific tax of Bs 0.15 per liter applied to soft drinks, as well as a specific tax of Bs 0.3 to Bs 1.2 per liter applied to alcoholic beverages. Bolivia also levies a special tax on the import and domestic sale of hydrocarbons and their derivatives; for example, in 2002, the specific tax on diesel oil was Bs 0.66 per liter.

Import taxes account for a significant portion of total tax revenue. As figure 2.1 shows, customs revenue from taxes on international trade represents between 30 and 40 percent of the National Treasury's total tax revenue. Customs revenue as a share of total revenue peaked in 1997 and 1998 because of imports required for the construction of a gas pipeline between Bolivia and Brazil, as well as increases in foreign investment in privatized companies.

Among the contributions of the various taxes on international trade to total National Treasury revenue, the value added tax, which is levied on all final imports of goods and services, is the most important, representing about 21 percent of the total. Customs duties are the second most important source of tax revenue and account for about 8 percent of total tax revenue (figure 2.2).

Figure 2.3 shows the effective rate...

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