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Macroeconomic and welfare effects of tax reforms in emerging economies: A case study of Morocco

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  • Ghiaie, Hamed
  • Auclair, Gregory
  • Noah Ndela Ntsama, Jean Frederic

Abstract

This paper assesses the macroeconomic and welfare effects of fundamental tax reforms in an emerging/developing economy. We develop a dynamic general equilibrium model with structural and institutional characteristics of non-oil emerging and developing economies and apply the model to Morocco. The model’s simulations suggest that tax reforms imply complex trade-off between growth, government revenue, and equity. A comprehensive approach associated with better targeted social programs, broadens the tax base, removes tax distorsions, better distributes the tax burden, and mitigates adverse distributional effects (that is improves welfare) by making the tax system more progressive and reducing inequalities. For Morocco, a comprehensive tax reform package would involve (i) reducing tax exemptions, (ii) a broader-based property tax, (iii) a lower corporate tax rate, (iv) aligning the VAT rate on exempted goods and services to the standard rates, and (v) a better targeted social safety net. The paper indicates that such a reform package is growth-friendly, broad-based, progressive and has implications for existing gender biases.

Suggested Citation

  • Ghiaie, Hamed & Auclair, Gregory & Noah Ndela Ntsama, Jean Frederic, 2019. "Macroeconomic and welfare effects of tax reforms in emerging economies: A case study of Morocco," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 666-699.
    • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:4:p:666-699
    DOI: 10.1016/j.jpolmod.2019.02.005
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    Cited by:

    1. Hamed Ghiaie & Hamidreza Tabarraei & Asghar Shahmoradi, 2021. "Financial rigidities and oil‐based business cycles," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5183-5196, October.
    2. Bação, Pedro & Duarte, Joshua & Simões, Marta, 2024. "Social expenditure composition, inequality and growth in the OECD: Labour market policies are most effective," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 75-89.
    3. El Khalifi, Ahmed & Ouakil, Hicham, 2024. "Aligning Public Spending and Taxes in the Moroccan Economy: A Dynamic General Equilibrium Model analysis," MPRA Paper 121891, University Library of Munich, Germany.
    4. Majumder, Amita & Ray, Ranjan & Santra, Sattwik, 2021. "Should commodity tax rates be uniform across regions in a heterogeneous country? Evidence from India," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1310-1331.

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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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