A Poverty-focused Evaluation of Commodity Tax OptionsWorld Bank, Poverty Reduction and Economic Management Network, Poverty Reduction Group, 2007 - Indirect taxation - 27 pages 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. |
Common terms and phrases
additively separable analysis assess Author's calculations basic benchmark Bibi and Duclos commodity k commodity taxation components of food computed Conakry Cost of Funds data for Guinea deprivation function developing countries Distributional Characteristics efficiency cost elasticity of poverty equal Essama-Nssah Expenditure Headcount Poverty fiscal food expenditure framework Gap Squared Poverty Headcount Poverty Gap headcount ratio health and education indicator Indirect Tax Reform indirect utility Inequality Kakwani Lambert Marginal Cost marginal poverty cost marginal social cost measure of pro-poorness Nicholas Stern non-poor Oxford Palm Oil percent Policy Research Poverty Gap Squared Poverty Gap Watts poverty line poverty measures Poverty Reduction Strategy poverty-focused price change price elasticity price of commodity Public Finance real income Reduction Group Republic of Guinea Research Working Paper Rice Smoked Fish social welfare social welfare function socially desirable socioeconomic agents Squared Poverty Gap value added tax value judgments w₁ Watts index Wok f x)dx World Bank