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A poverty-focused evaluation of commodity tax options (English)

The difficulties faced by many developing countries in raising revenue from direct taxes have forced them to rely heavily on indirect taxes to finance development interventions. The purpose of this paper is to show how to identify socially desirable options for commodity taxation in the context of a poverty reduction strategy. Within the logic of social evaluation the author assesses tax options on the basis of value judgments underlying members of the additively separable class of poverty measures. The criterion hinges on both the pattern of consumption of each commodity and the price elasticity of the poverty measure used. An application of this methodology to data for Guinea shows that many components of food expenditure (particularly cereals, grains, and roots) would be good candidates for exemption from value-added tax. Even though expenditure on health and education is distributed in favor of the non-poor, their importance for human capital development argues for a program of targeted subsidies in a broader context of cost recovery.

Details

  • Author

    Essama-Nssah, B.

  • Document Date

    2007/06/01

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS4245

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Guinea,

  • Region

    Africa,

  • Disclosure Date

    2010/07/01

  • Disclosure Status

    Disclosed

  • Doc Name

    A poverty-focused evaluation of commodity tax options

  • Keywords

    budget share;marginal cost of funds;square poverty gap;class of poverty measure;marginal utility of income;price elasticity;development strategy and policy;Growth Elasticity of Poverty;Efficiency of Public Expenditures;price elasticity of demand;process of trade liberalization;impact of price changes;marginal social cost;real income;commodity taxation;Tax Reform;social welfare function;value added tax;marginal efficiency cost;theory of taxation;national tax journal;public finance;impact of policy;indirect utility function;amount of income;household level data;current account deficit;human capital accumulation;change in poverty;ownership of asset;quid pro quo;individual living standard;pure consumption tax;decomposable poverty measure;central government revenue;impact of reforms;taxes on domestic;human capital development;aggregate demand function;government fiscal policy;measure of poverty;costs of taxation;standard of living;Social Impact Analysis;food expenditure;Poverty measures;headcount poverty;measure of use;Public Spending;deprivation function;optimal behavior;social evaluation;raise revenues;tax base;benchmark case;economic welfare;public fund;palm oil;producer price;income poverty;food subsidies;high-income household;tax option;public policy;tax system;poverty eradication;international community;individual behavior;individual welfare;consumer price;marginal change;headcount ratio;fiscal adjustment;public production;optimal taxation;cross price;school supply;world development;marginal increase;consultation fees;tax revenue;livestock product;informal sector;consumption pattern;high-income individual;poverty deficit;microeconomic analysis;marginal benefit;tax rate;public revenue;social policy;price reduction;food commodity;expenditure cut;budget deficit;administrative cost;taxable transaction;education expenditure;international tax;consumer behavior;fiscal studies;energy resource;oil price;tax policy;edible oil;exogenous shock;basic necessity;vulnerable segment;poverty trend;market system;Fiscal policies;equal share;production efficiency;academic publishers;aggregate budget;weighted average;aggregate poverty;Economic Policy;tax rule;public price;social policies;social support;evaluation framework;poverty outcome;poverty focus;basic capability;socioeconomic systems;tax due;negative tax;poverty impact;institutional constraint;standard approach;modern theory;poverty index;social interaction;competitive market;excessive debt;density function;optimization problem;domestic tax;fixed budget;marginal reduction;envelope theorem;individual utility;poverty increase;poverty indicator;International Trade;poverty incidence;household expenditure;monetary term;rural phenomenon;rural population;policy option;retail stage;distribution chain;economic crisis;monetary policy;welfare impact;cross-price elasticity;fiscal deficit;tax payer;dimensional vector;production tax;tax burden;poverty status;incentive effect;aggregation rule;representative sample;world price;targeted subsidy;canned food;school fee;expenditure component;parent-teacher association;health expenditure;guinean franc;participatory approach;fiscal management;fighting poverty;improving governance;

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Citation

Essama-Nssah, B.

A poverty-focused evaluation of commodity tax options (English). Policy, Research working paper ; no. WPS 4245 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/425211468257934176/A-poverty-focused-evaluation-of-commodity-tax-options