This paper studies the effects of different tax schemes used in fishery management in combination with an Individual Transferable Quota (ITQ) system. It focuses on the effects of taxes on equilibrium quota prices and violations under the assumption that enforcement to induce compliance is imperfect and costly. The use of taxes is motivated by the regulator’s need to recover costs for enforcement activities.
This study proposes basing these taxes on the price of the processed products because such a policy would reduce violations and because the information necessary to implement it is available. It also shows that this tax has a double pay-off for enforcement because it reduces the demand for illegal fishing and increases revenue for enforcement activities without producing a deadweight loss in the quota market.
