The marginal cost of public funds and tax reform in Africa
AbstractIn this paper we propose estimates of the marginal cost of public funds (MCF) in 38 African countries. We develop a simple general equilibrium model that can handle taxes on five major tax classes, and can be calibrated with little more than national accounts data. A key feature of our model is the explicit recognition of the informal economy. Our base case estimate of the average MCF from marginal increases in all five tax instruments is 1.2. Focusing on the lowest cost tax instruments in each country, commonly the VAT but not always, the average MCF is 1.1. Finally extending the tax base to include sections of the informal economy by removing some tax exemptions offers the potential for a low MCF source of public funds, and a lowering of MCFs on other tax instruments.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 97 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/devec
Marginal cost of public fund; Tax reform; Developing countries; Africa;
Other versions of this item:
- Auriol, Emmanuelle & Walters, Michael, 2009. "The Marginal Cost of Public Funds and Tax Reform in Africa," TSE Working Papers 09-110, Toulouse School of Economics (TSE).
- Auriol, Emmanuelle & Warlters, Michael, 2012. "The Marginal Cost of Public Funds and Tax Reform in Africa," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
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