Tax Incidence in Madagascar: An Analysis Using Household Data
This article discusses tax incidence in Madagascar and asks who pays the taxes that finance government spending. Its main concern is to identify the progressivity of different taxes levied in Madagascar, based on the consumption and income patterns found in the 1994 Enquete Permanente aupres des Menages, a nationally representative survey. The results suggest that most taxes are progressive, meaning that wealthy households pay proportionately more of these taxes relative to their expenditures than do poor households. Two notable exceptions are taxes on kerosene and export duties on vanilla, both of which are regressive. These results are consistent with those of a study of Ghana, the only other comparable research on tax incidence in Africa. That study found taxes on kerosene and cocoa exports to be the most regressive taxes in Ghana. Making firm policy recommendations for tax reform would require an analysis of the economic efficiency and administrative efficacy of different taxes to complement this article's work on their equity implications. Nevertheless, the results suggest that the movement away from trade taxes, especially export duties, and toward broadly based value added or income taxes would be more equitable and more economically efficient. The only legitimate impediment to such reforms in Madagascar is administrative, that is, the government's ability to collect different taxes effectively. Although administrative efficiency may be a problem for value added or income taxes, taxes on petroleum products (except kerosene) are highly progressive and provide a good tax handle. Copyright 1999 by Oxford University Press.
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Volume (Year): 13 (1999)
Issue (Month): 2 (May)
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