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Can the removal of VAT Exemptions support the Poor? The Case of Niger

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  • Celine DE QUATREBARBES
  • Dorothée BOCCANFUSO
  • Luc SAVARD

Abstract

In order to have the public funds necessary for its development, Niger is examining the possibility of expanding its VAT tax base to exempted goods and basic food products. This proposal has prompted violent opposition leading to the question of the social impacts of taxation. The first micro-macro computable general equilibrium model of Niger's actual economy has been developed. This model allows analysis of the social impact and distributional analysis of the following VAT structures: a pure VAT structure, a structure maintaining certain exemptions, and a multiple-rate VAT structure. The model’s results shows that although restoring the VAT rate would be socially costly compared to the initial situation, the distributional impact of the VAT differs according to the system implemented in the country. Maintaining VAT exemptions in food crop agriculture sectors associated with a tax base expansion in the remaining sectors will increase public revenue while taking into account the national goal of poverty reduction. The net social impact of exoneration depends on the economic structure of the concerned sector. If the national goal is the end of exemption, the model shows that applying a pure VAT conforming to the theory is preferable in terms of economic growth whereas applying a reduced-rate on food crop agriculture lightens the social impact of the end of exemptions compared to a single rate.

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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 201106.

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Length: 32
Date of creation: 2011
Date of revision:
Handle: RePEc:cdi:wpaper:1245

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Keywords: distributional analysis; Value Added Tax; exemptions; micro-simulation; Computable general equilibrium model; niger;

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  1. Scarf,Herbert E. & Shoven,John B., 2008. "Applied General Equilibrium Analysis," Cambridge Books, Cambridge University Press, number 9780521070935, April.
  2. de Melo, Jaime, 1988. "Computable general equilibrium models for trade policy analysis in developing countries: A survey," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 469-503.
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Cited by:
  1. Ronald Davies & Louren Paz, 2010. "Tariffs Versus VAT in the Presence of Heterogeneous Firms and an Informal Sector," The Institute for International Integration Studies Discussion Paper Series iiisdp323, IIIS, revised Mar 2010.
  2. Jonathan Goyette, 2012. "Optimal tax threshold: the consequences on efficiency of official vs. effective enforcement," Cahiers de recherche 12-07, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.

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