Can the removal of VAT Exemptions support the Poor? The Case of Niger
AbstractIn 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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Date of creation: 16 Mar 2011
Date of revision:
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distributional analysis; Value Added Tax; exemptions; micro-simulation; Computable general equilibrium model; niger;
Other versions of this item:
- Dorothée Boccanfuso & Céline de Quatrebarbes & Luc Savard, 2011. "Can the removal of VAT Exemptions support the Poor? The Case of Niger," Cahiers de recherche 11-04, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
- Celine DE QUATREBARBES & Dorothée BOCCANFUSO & Luc SAVARD, 2011. "Can the removal of VAT Exemptions support the Poor? The Case of Niger," Working Papers 201106, CERDI.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-03-26 (Agricultural Economics)
- NEP-ALL-2011-03-26 (All new papers)
- NEP-CMP-2011-03-26 (Computational Economics)
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