A poverty-focused evaluation of commodity tax options
AbstractThe 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.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4245.
Date of creation: 01 Jun 2007
Date of revision:
Rural Poverty Reduction; Population Policies; Economic Theory&Research; Achieving Shared Growth;
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- Essama-Nssah, B. & Bassole, Leandre, 2010. "A counterfactual analysis of the poverty impact of economic growth in Cameroon," Policy Research Working Paper Series 5249, The World Bank.
- Backiny-Yetna, Prospère & Wodon, Quentin, 2010.
"Pauvreté en Guinée de 1994 à 2007: Tendances, perceptions, et priorités des ménages
[Poverty in Guinea from 1994 to 2007: Trends, Perceptions, and Household Priorities]," MPRA Paper 34380, University Library of Munich, Germany.
- Essama-Nssah, B., 2008. "Assessing the redistributive effect of fiscal policy," Policy Research Working Paper Series 4592, The World Bank.
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