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A microsimulation of the Uganda tax system (UGATAX) and the poor from 1999 to 2003


  • Ssewanyana, Sarah N.
  • Okidi, John A.


Like most developing countries, Uganda faces serious fiscal challenges in her effort to mobilize and effectively use resources for poverty reduction. however, the tax base remains small as reflected in the low tax-to-GDP. the government is under internal and external pressure to increase its domestic revenue collection and i turn, reduce its dependency on donors. In response to the pressure the government endeavored to maintain fiscal discipline, partly by raising taxes. the consequences of this move on the poor remains unclear. the main purpose of this paper is to throw light on the effects of alternative reforms to existing tax system on those households living in poverty. The analysis was carried out using the nationally representative Uganda national household survey of 1999/00 (UNHS I) using micro-simulation techniques. the key findings emerging from the analysis are: Increasing value added tax (VAT) other taxes unchanged will increase the tax burden of the poor but the non-poor households will continue paying more taxes relative to their expenditures that the poor households; Zero rating of the key taxable consumer items consumed by the poor would have little fiscal consequences. the amount of revenue forgone is less than the graduated tax (head tax) forgone; and the largest portion of the tax burden born by the poor households originates from VAT followed by excise duties and graduated tax.

Suggested Citation

  • Ssewanyana, Sarah N. & Okidi, John A., 2008. "A microsimulation of the Uganda tax system (UGATAX) and the poor from 1999 to 2003," Research Series 54940, Economic Policy Research Centre (EPRC).
  • Handle: RePEc:ags:eprcrs:54940

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    References listed on IDEAS

    1. Engel, Eduardo M. R. A. & Galetovic, Alexander & Raddatz, Claudio E., 1999. "Taxes and income distribution in Chile: some unpleasant redistributive arithmetic," Journal of Development Economics, Elsevier, vol. 59(1), pages 155-192, June.
    2. John J Matovu & Duanjie Chen & Ritva Reinikka-Soininen, 2001. "A Quest for Revenue and Tax Incidence in Uganda," IMF Working Papers 01/24, International Monetary Fund.
    3. David E. Sahn & Stephen D. Younger, 1999. "Dominance Testing of Social Sector Expenditures and Taxes in Africa," IMF Working Papers 99/172, International Monetary Fund.
    4. Kappel, Robert & Lay, Jann & Steiner, Susan, 2004. "The Missing Links - Uganda's Economic Reforms and Pro-Poor Growth," Open Access Publications from Kiel Institute for the World Economy 3840, Kiel Institute for the World Economy (IfW).
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