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Social Impact of a Tax Reform: The Case of Ethiopia

Author

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  • Stanley Sang-Wook Cho
  • Ms. Sònia Muñoz

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

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

    1. Asatryan, Zareh & Gomtsyan, David, 2020. "The incidence of VAT evasion," ZEW Discussion Papers 20-027, ZEW - Leibniz Centre for European Economic Research.
    2. Cornia, Giovanni Andrea & Martorano, Bruno, 2017. "Income Inequality Trends in sub-Saharan Africa: Divergence, determinants and consequences: Inequality and Growth in an Agricultural-led Development Model: The case of Ethiopia over 1995-2011," UNDP Africa Reports 267649, United Nations Development Programme (UNDP).
    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. Jean-Louis COMBES & Gérard CHAMBAS & Joseph G. ATTILA, 2009. "Aide publique au développement et transition fiscale," Working Papers 200901, CERDI.
    5. Mr. Michael Keen, 2012. "Taxation and Development: Again," IMF Working Papers 2012/220, International Monetary Fund.
    6. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    7. Oya Pinar Ardic & Burcay Erus & Gurcan Soydan, 2010. "An evaluation of indirect taxes in Turkey," Economics Bulletin, AccessEcon, vol. 30(4), pages 2787-2801.
    8. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    9. 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.
    10. repec:rac:ecchap:2017-14 is not listed on IDEAS
    11. 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.
    12. Ivanna Vladkova Hollar & Rodrigo Cubero, 2010. "Equity and Fiscal Policy: The Income Distribution Effects of Taxation and Social Spending in Central America," IMF Working Papers 2010/112, International Monetary Fund.
    13. 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.
    14. 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.
    15. Daniel Abraham Mengistu, 2014. "The Impact of Fiscal Policy on Poverty in Ethiopia: a Computable General Equilibrium Microsimulation Analysis," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 22(1), November.
    16. 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.

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