IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/03-232.html
   My bibliography  Save this paper

Social Impact of a Tax Reform; The Case of Ethiopia

Author

Listed:
  • Sònia Muñoz
  • Stanley Sang-Wook Cho

Abstract

This paper provides an assessment of the poverty and social impact of replacing Ethiopia's sales tax with a value-added tax (VAT). The results indicate that this reform has not had a major adverse effect on the poorest 40 percent of the population. The VAT is progressive in its incidence, and the higher revenues brought about by the VAT can provide additional funds for poverty-reducing spending, including primary education. At the same time, there is significant scope for making education spending more pro-poor by increasing the access of low-income households to schools.

Suggested Citation

  • Sònia Muñoz & Stanley Sang-Wook Cho, 2003. "Social Impact of a Tax Reform; The Case of Ethiopia," IMF Working Papers 03/232, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/232
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17018
    Download Restriction: no

    References listed on IDEAS

    as
    1. Russell Davidson & Jean-Yves Duclos, 1997. "Statistical Inference for the Measurement of the Incidence of Taxes and Transfers," Econometrica, Econometric Society, vol. 65(6), pages 1453-1466, November.
    2. Shahabuddin M Hossain, 2003. "Poverty and Social Impact Analysis; A Suggested Framework," IMF Working Papers 03/195, International Monetary Fund.
    3. Hentschel, J. & Lanjouw, P., 1996. "Constructing an Indicator of Consumption for the Analysis of Poverty. Principles and Illustrations with Reference to Ecuador," Papers 127, World Bank - Living Standards Measurement.
    4. Alderman, Harold & del Ninno, Carlo, 1999. "Poverty Issues for Zero Rating VAT in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(2), pages 182-208, July.
    5. Ke-young Chu & Hamid R Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 00/62, International Monetary Fund.
    6. Gabriela Inchauste, 2002. "Poverty and Social Impact Analysis in PRGF-Supported Programs," IMF Policy Discussion Papers 02/11, International Monetary Fund.
    7. 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.
    8. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
    9. Yitzhaki, Shlomo, 1983. "On an Extension of the Gini Inequality Index," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 617-628, October.
    10. Lanjouw, Peter & Ravallion, Martin, 1998. "Benefit incidence and the timing of program capture," Policy Research Working Paper Series 1956, The World Bank.
    11. Devarajan, Shantayanan & Hossain, Shaikh I., 1995. "The combined incidence of taxes and public expenditures in the Philippines," Policy Research Working Paper Series 1543, The World Bank.
    12. International Monetary Fund, 2002. "Ethiopia; Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Requests for Augmentation of Access and for Waiver of Performance Criterion, and Second Annual," IMF Staff Country Reports 02/68, International Monetary Fund.
    13. Thurlow, James & Wobst, Peter, 2003. "Poverty-focused social accounting matrices for Tanzania," TMD discussion papers 112, International Food Policy Research Institute (IFPRI).
    14. Caroline M Kende-Robb, 2003. "Poverty and Social Impact Analysis; Linking Macroeconomic Policies to Poverty Outcomes: Summary of Early Experiences," IMF Working Papers 03/43, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raghbendra Jha & T. Palanivel, 2007. "Resource Augmentation for Meeting the Millennium Development Goals in the Asia Pacific Region," ASARC Working Papers 2007-02, The Australian National University, Australia South Asia Research Centre.
    2. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    3. Sijbren Cnossen, 2015. "Mobilizing VAT revenues in African countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(6), pages 1077-1108, December.
    4. Michael Keen, 2012. "Taxation and Development; Again," IMF Working Papers 12/220, International Monetary Fund.
    5. Christian E. Weller & Manita Rao, 2008. "Can Progressive Taxation Contribute to Economic Development?," Working Papers wp176, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. Bird, Richard M. & Zolt, Eric M., 2005. "The limited role of the personal income tax in developing countries," Journal of Asian Economics, Elsevier, vol. 16(6), pages 928-946, December.
    7. Michael Keen, 2009. "What Do (and Don't) We Know about the Value Added Tax? A Review of Richard M. Bird and Pierre-Pascal Gendron's The VAT in Developing and Transitional Countries," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 159-170, March.
    8. Rodrigo Cubero & Ivanna Vladkova Hollar, 2010. "Equity and Fiscal Policy; The Income Distribution Effects of Taxation and Social Spending in Central America," IMF Working Papers 10/112, International Monetary Fund.
    9. Jean-Louis COMBES & Gérard CHAMBAS & Joseph G. ATTILA, 2009. "Aide publique au développement et transition fiscale," Working Papers 200901, CERDI.
    10. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2016. "Linking taxation and social protection Evidence on redistribution and poverty reduction in Ethiopia," WIDER Working Paper Series 111, World Institute for Development Economic Research (UNU-WIDER).
    11. World Bank, 2014. "Restructuring Corporate Income Tax and Value Added Tax in Vietnam : An Analysis of Current Changes and Agenda for the Future," World Bank Other Operational Studies 17832, The World Bank.
    12. Oya Pinar Ardic & Burcay Erus & Gurcan Soydan, 2010. "An evaluation of indirect taxes in Turkey," Economics Bulletin, AccessEcon, vol. 30(4), pages 2787-2801.
    13. Ajitava Raychaudhuri & Sudip Kumar Sinha & Poulomi Roy, 2007. "Is the Value Added Tax Reform in India Poverty-Improving? An Analysis of Data from Two Major States," Working Papers PMMA 2007-18, PEP-PMMA.
    14. UNDP Regional Bureau for Africa & Bruno Martorano & Giovanni Andrea Cornia, "undated". "Inequality and Growth in an Agricultural-led Development Model: The case of Ethiopia over 1995-2011," UNDP Africa Policy Notes 2017-14, United Nations Development Programme, Regional Bureau for Africa.
    15. Ada Jansen & Elizabeth Stoltz & Derek Yu, 2012. "Improving the targeting of zero-rated basic foodstuffs under value added tax (VAT) in South Africa - An exploratory analysis," Working Papers 07/2012, Stellenbosch University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:03/232. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi). General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.