noted above, cumulating to 44.68 percent (see Appendix 1). In addition, sugar benefits from a special TCI variable levy ( _péréquation)_ , with a reference price ( _prix de déclenchement_ ) used to establish duties assessed rather than import price. The computation of the reference price is discussed below. If the import price is below the reference price, all duties levied, including VAT, are assessed on the reference price. Moreover, additional duties are levied equal to the difference between the import price and the reference price, so that the TCI acts as a variable levy ( _valeur mercurial_ ).

as a variable levy ( _valeur mercurial_ ). Let be the world price, be the reference price, _Q_ the volume of imports and _t_ the overall WAEMU statutory import tax rate on final products (equal to 44.68 percent). Taxes ww levied T are equal to PP PP<sup>�</sup> (1) ww Dividing T by TT= �PP<sup>�</sup> −PP, i.e., the value of imports at world prices, yields the �QQ+ Q _ex post_ statutory tax rate under the perequation, which can be shown to collapse to: ww PP QQ QQ̂ (2) = ) - 1 QQ̂ PPPP<sup>�</sup> ww (1 + QQ That is, the tax rate depends on the ratio of the reference price to the world price, along with the normal tax rate, providing endogenous protection. If the world price of sugar is well below the reference price, extremely high rates of import protection can apply. Appendix 1 illustrates a case where the CIF import price of sugar is 250,000 CFAF per ton, compared to the reference price of 325,056 CFAF per ton. The overall nominal level of protection is above 80 percent in this case. Thus, sugar is subject to endogenous and potentially very high protection.

In practice, actual protection has been considerably lower than the _ex post_ statutory rate implied by equation (2), until recently. Table 1 computes the actual _ex post_ tax rate versus statutory tax rates based on equation (2) on sugar using unpublished customs data on import values, weights and duties collected. The first four columns of Table 1 show the ratio of taxes collected (adding customs duties, VAT, and other levies) to reported import values. These rates are surprisingly low, with the overall rate very close to the ordinary WAEMU top bracket of 45 percent in most years, even though the reference price is far above the world price (column 5). Partial exceptions occur in 2003-2004, with overall tax rates rising to close to 60 percent, but this rate is still far too low to be consistent with equation (2). Effective tax rates based on world prices rather than customs values are higher, however, because customs values of imports are apparently adjusted upward, although it is not clear exactly how customs is doing this. The customs data enable computation of an implicit “unit value of imports”, by dividing value of imports by weight (column 6). The resulting customs unit value of imports for sugar are generally well above world prices (about double until 2010) yet below the reference price, as can be inferred from the fifth and sixth columns of Table 1.

Considering the gap between customs unit values and world prices enables computation of the “adjusted actual tax rate” that is obtained by dividing taxes paid by 8