Incidence of Fiscal Policies on Poverty and Inequality in Guinea (Inglês)

Despite abundant natural endowments, including mining and favorable agroclimatic conditions, Guinea remains a low-income country where poverty reduction and shared prosperity have not materialized over the past decades. The country, which is significantly...  Exibir mais + Despite abundant natural endowments, including mining and favorable agroclimatic conditions, Guinea remains a low-income country where poverty reduction and shared prosperity have not materialized over the past decades. The country, which is significantly vulnerable to several shocks, faces multiple challenges that prevents it from translating its opportunities into higher incomes for households. Even if Guinea is not a fragile country according to the World Bank’s definition,1 it has been considered as being on the fringe of fragility due to internal and external shocks it is facing, including political instability and health shocks (for instance, the Ebola epidemic) among others. Moreover, given the low investment levels, lagging infrastructure, and limited financial intermediation, the economic growth has been too low to contribute to poverty reduction. In fact, the relatively high inequality and the low economic growth may explain why poverty is stagnating or increasing. Moreover, consumption growth did not appear to be pro-poor during the past years. It emerges from the Guinea Systematic Country Diagnostic (SCD)2 that weak fiscal management is one of the major constraints that prevent the country from experiencing sustainable and inclusive growth. The direct taxation system is marked by a dependence on taxes on international markets, while very little progress is being made in improving tax administration and widening the tax base among others. It is then important for Guinea to improve domestic revenue mobilization, especially because there are large gaps compared to neighboring countries. For instance, the tax revenue of Senegal was on average 6 percent of GDP higher than that of Guinea, reflecting the potential to increase the direct tax revenue in this country. The fiscal incidence study estimates the impact on poverty and inequality in the country of taxation (direct and indirect taxes), subsidies, and social spending including public transfers such as cash and food transfers and in-kind transfers in education and health, among others. It may then analyze the expenditures, taxes, and exemptions that have the greatest impact on reducing poverty and inequality. For example, in a situation often characterized by lack of financial resources, this study may prove to be one of the tools of trade-off between the sectors to be prioritized in public spending. It also helps identify the types of reforms that could have a greater impact on reducing poverty and inequality and could therefore be a useful accompaniment to the implementation of tax reforms. The Commitment to Equity (CEQ) is one of the tools currently used to carry out these studies.  Exibir menos -