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The Distributional Implications of personal Income Tax Reforms: The case of Civil Service sector in Ethiopia

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  • Abu, Girma Moges

Abstract

The principles of horizontal and vertical equity are central in fiscal policy. The distributional implications of a taxation system are derived from how the tax codes incorporate these principles for a given pattern of income distribution. This paper examines the distributional issues and implications of personal income tax reforms in Ethiopia with reference to the civil service sector. The theoretical issues and policies are analyzed in light of the 1994 and 2002 income tax reforms. We argue that whereas the reform measures undertaken so far have addressed some problems in the fiscal system, further measures are needed to improve the capacity of the tax code to promote the principles of equity and to encourage capital accumulation and growth efforts. The built-in structure of the tax system, coupled with conventional approaches in tax policy design and implementation, has contributed towards policy stances that weaken the role that the tax system could play in promoting sustainable economic growth and address problems of chronic poverty.

Suggested Citation

  • Abu, Girma Moges, 2005. "The Distributional Implications of personal Income Tax Reforms: The case of Civil Service sector in Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 9(2), pages 130-130, May.
    • Handle: RePEc:ags:eeaeje:250053
    DOI: 10.22004/ag.econ.250053
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    References listed on IDEAS

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    1. Mitra, Tapan & Ok, Efe A, 1996. "Personal Income Taxation and the Principle of Equal Sacrifice Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 925-948, November.
    2. Taye Mengistae, 1998. "Wage rates and job queues: does the public sector overpay in Ethiopia?," CSAE Working Paper Series 1998-20, Centre for the Study of African Economies, University of Oxford.
    3. Mr. Ian Lienert & Jitendra R. Modi, 1997. "A Decade of Civil Service Reform in Sub-Saharan Africa," IMF Working Papers 1997/179, International Monetary Fund.
    4. International Monetary Fund, 1999. "Ethiopia: Recent Economic Developments," IMF Staff Country Reports 1999/098, International Monetary Fund.
    5. Sandra R. Baum, 1987. "On the Measurement of Tax Progressivity: Relative Share Adjustment," Public Finance Review, , vol. 15(2), pages 166-187, April.
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