Tax Incidence in Vietnam*

This paper examines the incidence of taxation in Vietnam, using data from the Living Standards Survey of 1997–1998 and an input–output matrix for 1997. The tax system in 1998 was slightly progressive, taking the equivalent of 7.8percent of spending for households in the lowest, and 10.3percent from households in the highest expenditure quintile. The replacement of the turnover tax by a value‐added tax in January 1999 made the system marginally more progressive, and the falling importance of taxes on trade has had a negligible effect on the overall incidence of the tax system. The tax system is progressive overall because business income taxes fall mainly on better‐off households; and low‐income households rely heavily on home consumption, which is untaxed. Against this, agricultural taxes and fees are highly regressive. The recent phasing out of the agricultural land use tax is making the tax system more progressive; however, efforts since 2004 to limit price increases for motor fuels have effectively provided a relatively greater subsidy to rich than to poor households.     

Chile: The Unbearable Burden of Inequality

Chile has been cited as a successful case of development. Relatively fast economic growth over almost two decades has been accompanied by a significant reduction in absolute poverty. However, persistent economic growth and a mostly pro-poor structure of public expenditures have not been sufficient to reduce inequality in one of the most unequal countries in the world. We show that the key factors explaining this persistent inequality have been a low level of fiscal expenditures caused by low tax revenues that have not permitted enough public investment in human capital and knowledge generation and diffusion.     

中国财政政策降低不平等的效应分析:嵌入失业风险的视角

本文通过构建一个包含个体失业风险的Hank模型来分析财政政策降低不平等的影响路径与政策效果.研究发现:(1)由于储蓄规则和流动性约束作用,不平等的加剧会增加总储蓄率,不利于向以消费为主的经济结构转型;(2)降低收入所得税对减轻不平等的效果取决于其累进程度,降低比例税可降低不平等,增加一般性转移支付对改善不平等效果不显著...     

LIBERALISING TRADE IN SOUTH AFRICA: A SURVEY OF COMPUTABLE GENERAL EQUILIBRIUM STUDIES

This paper reviews applications of computable general equilibrium models to trade liberalisation in South Africa. It focuses on economic structure, data, macroeconomic closure and results of the models. The models project that trade liberalisation has had small positive impacts on growth. Poverty and inequality outcomes are less clear cut and depend on the model used. Models with fully integrated micro data find that poverty has worsened slightly while inequality has risen. Aggregated models predict that poverty has been reduced by small amounts. Dynamic models report rising inequality but falling poverty incidence. The paper identifies areas for future research.     

Tax policy implications for a two‐engine growing economy

In an endogenous growth model with two engines of R&D and capital, we investigate the environment of “inclusive growth” for tax reallocations (tax increases or tax credits) to gain broader benefits in terms of promoting the overall GDP growth without an increase in income inequality. Our results show that a tax increase in the capital‐good sector can result in inclusive growth, boosting overall growth and reducing income inequality, provided that the status quo tax rate is not too high. Surprisingly, tax credits are not able to achieve such inclusive growth. While the GDP growth rises, a tax credit in the R&D sector not only increases income inequality but also decreases the aggregate employment, if the labor mobility cost between the final‐good and R&D/capital‐good sectors is relatively low. This provides a caution to policymakers given the fact that research tax credits have served as a common incentive to strengthen the R&D environment.     

The growth,poverty and inequality nexus in South Africa: Cointegration and causality analysis

This study empirically established the long-run relationship and causality effects that exist between growth, poverty and inequality. The analysis was carried out on a panel of nine South African provinces from 1995 to 2012. To capture poverty and inequality in a broader context, two measures of poverty (income and non-income) and three measures of inequality (income, education and land) were adopted for the study. The results confirm that there is a long-run relationship between growth, poverty and inequality. Notable results from the causality tests suggest that growth does not promote equal distribution of income in society but as income distribution begins to equalise, economic growth rises. This is regarded as growth–inequality disconnect. The unidirectional causality, which runs from income poverty to income inequality, suggests that a rising level of income poverty will lead to falling income inequality in the society; likewise, income inequality increases as non-income poverty declines.     

Poverty issues for zero rating VAT in South Africa

Governments often include equity considerations when determiningrates for value added taxes (VAT). This paper explores the implicationof current and proposed tax exemptions in South Africa fromthe perspective of their impact on the expenditures of the poorand on the calorie and protein consumption of low-income households.Maize, which is currently exempted from VAT, is shown to bethe best choice for low tax rates from both the standpointsof equity and the impact on the food consumption of the poor.In contrast, lower tax rates on fluid milk, which is currentlyexempted from VAT, and meat, for which an exemption has beenproposed, are not good vehicles for assisting the poor. Thepaper illustrates the revenue forgone with zero tax rates onthese commodities and compares the tax relief for the poor andchange in nutrients consumed from alternative tax exemptions.     

Two Decades of Declining Poverty but Rising Inequality in Laos

Over the past two decades consumption inequality has risen within Laos, while absolute poverty incidence has halved. The estimated Gini coefficient of private household expenditures per person rose from 0.311 to 0.364. This increase in the sample‐based estimate of inequality was statistically significant and occurred in all regions, in both rural and urban areas and among all major ethnic, educational and sectoral employment categories. Within‐group increases in inequality dominated between‐group changes. Official policy largely overlooks this point, focusing on reducing inequality between rather than within major groups. Economic inequality seems certain to become a more pressing policy concern.     

The poverty implications of alternative tax reforms: Results from a numerical application to Pakistan

This paper presents results from four simulations of the impact of potential tax reforms in Pakistan on poverty, shared prosperity, and inequality. The simulations are carried out in the context of a dynamic computational general equilibrium (CGE) model that incorporates endogenous tax evasion. The simulations link the CGE model to household survey data that is incorporated in a micro simulation model. The combined models suggest that equal yield increases in sales and corporate tax rates differ mildly in their impacts on consumption and poverty. Endogenously modeled tax evasion plays an important role in the results.     

Welfare States in Hard Times

Welfare states have been subject to a host of conflicting pressuresfrom high unemployment, rising income inequality, populationaging, tax competition, rising budget deficits and debts, slowgrowth, and fears that economic dynamism was being stifled byexcessive taxes and benefit levels. Nevertheless total spendingon welfare has edged up in many countries and cuts in ratesof benefit have generally been fairly modest. The generosityof the welfare state has an enormous influence on poverty andincome inequality and still appears to be popular in most ofEurope. Suggestions that society would benefit from reducedworking time must reckon with the fact that it is paid workwhich generates the tax revenue required to fund welfare spending. Footnotes ¹ E-mail addresses: donatella.gatti{at}cepremap.cnrs.fr; andrew.glyn{at}economics.oxford.ac.uk     

Tax reform issues in Korea

The relatively simple nature of the tax policy in Korea is changing recently, as widening income gap, unemployment, social expenditures, and decentralization have become important policy issues. In this paper, the tax system in Korea is overviewed, and several important tax reform issues such as economic growth, tax competition, redistribution, tax assignment, and real estate taxes are discussed. The main reform issues are the followings. The tax burden is expected to rise, but the direction of changes in tax mix is not clear since social expenditures can play as important role as direct taxation for redistribution. Taxes related to real estates in Korea are too complicated, and the progressivity is needed to be lessened. The roles of central and local governments with respect to tax policy are not well designed. Redistributive function should be assigned to the central governments, and tax exporting of local governments should be minimized.     

Poverty, Inequality and Growth in Selected Middle East and North Africa Countries, 1980–2000

This paper uses crosscountry data and country-case studies to analyze trends in poverty, inequality and economic growth in the Middle East and North Africa (MENA) region. Compared to other regions, the MENA region has a low incidence of poverty and income inequality. Two factors account for this situation: international migration/remittances and public sector (government) employment. Since the early 1980s international migration to the Persian Gulf and Europe has helped boost the incomes of the poor in the Middle East. At the same time, many MENA countries have used government employment as a means of keeping people employed and out of poverty. Regression analysis of crosscountry data shows that both of these factors have a statistically significant impact on reducing the level and depth of poverty in the MENA region.     

Trade Opening,Fiscal Reforms,Poverty, and Inequality: A CGE Analysis for Bangladesh

We assess the short‐ and long‐run impacts of tariff reform policies on Bangladeshi households' poverty and income distribution by developing an 86‐sector, four‐factor, and nine‐household‐group computable general equilibrium (CGE) model. The main findings are that the complete removal of tariffs leads to a decrease in overall poverty with rich household groups in a relatively better position. In the short run poverty incidence increases for rural landless, urban illiterate, and low‐educated household groups whereas rural large farmer and urban medium household groups enjoy improvements in all poverty indicators. In terms of income distribution, trade liberalization enhances inequality slightly, but there is a tendency towards more equitable distribution in the long run. The choice of a fiscal compensatory mechanism with consumption tax is likely to play a negative role in terms of poverty and inequality in the short run; however, interestingly, the results are pro‐poor in the long run.     

Poverty incidence and economic growth in Southeast Asia

The countries of Southeast Asia have achieved very large reductions in absolute poverty incidence over recent decades. This paper examines the relationship between this accomplishment and the rate of economic growth. It develops a time series of available data on the headcount measure of poverty incidence for Thailand, Indonesia, Malaysia, and the Philippines over the period from the 1960s to 1999, in aggregate and in both rural and urban areas. It then uses this pooled data set to analyze the economic determinants of poverty incidence, the impact of the 1997 economic crisis and the degree to which poverty will be affected by alternative hypothetical recovery paths.     

An Efficiency Analysis of Proposed State and Local Sales Tax Reforms

With few exceptions, state and local general sales and use taxes are levied primarily on tangible goods. Secular trends in production and consumption of goods and services, as well as legislated exemptions and exclusions, have eroded sales tax bases. A number of reforms designed to reduce base erosion have been proposed, including base broadening, conversion to a consumption tax, and wholesale replacement of sales taxes with income taxes. Each proposal has potential to shore up sales tax bases. From an economic perspective, the policy choice should turn on efficiency, equity, and simplicity. This paper reports on a computer analysis of efficiency effects. The results suggest that (i) base broadening can increase economic efficiency, (ii) converting to a consumption tax base dominates base broadening, (iii) replacing sales taxes with higher income taxes could produce large efficiency losses, (iv) base broadening could generate efficiency gains even if untaxed remote sales become a “sizable” fraction of total sales, and (v) even partial base broadening could produce sizable efficiency improvements.     

The Impact of Personal Income Tax Structure on Income Inequality for Belgium,Bulgaria, Germany,Lithuania, and Poland: A Comparison of Flat and Graduated Income Tax Structures

The level of income inequality in a country is usually a contentious and politically divisive issue. How the tax structure affects this inequality is of crucial concern to policymakers. In this paper, we examine the income tax experiences of five European Union countries: Belgium, Bulgaria, Germany, Lithuania, and Poland. This paper focuses on the comparison between flat and graduated personal income tax rate structures. Various methods were used to measure the progressivity of income taxes across these countries such as the average tax rate, cumulative shares of income, and the Gini and other indices. The findings show that the graduated rate income tax structure of Germany and Belgium are the most effective at reducing inequality. On the other hand, Lithuania’s proportional income tax structure is much more effective at reducing income inequality when compared to the graduated rate structure of Poland. Also, an appropriately-sized income tax threshold can transform a flat structure to a redistributive one that compares favorably with some graduated rate structures. In the case of Bulgaria, introducing an income tax threshold that is roughly the size of average income would reduce inequality by about 4 %.

     

Fiscal Faux Pas?: An Analysis of the Revenue Implications of Trade Liberalization

This paper examines the argument that trade liberalization depresses tax revenue/GDP ratios in developing countries. This occurs because the structural characteristics associated with developing countries limit their ability to make the transition from trade to domestic taxes. Using a panel of 80 developing and industrialized countries over 1970–98, the econometric analysis carried out employs a fixed-effects regression framework to examine the evidence. The results indicate that low-income and upper middle-income countries have experienced declining tax revenues as a result of falling income and trade tax revenues and that structural characteristics have been significant in explaining the decline.     

The dynamic macroeconomic effects of tax policy in an overlapping generations model

The paper studies the dynamic allocation effects of tax policywithin the context of an overlapping-generations model of theBlanchard-Yaari type. The model is extended to allow for endogenouslabour supply and three tax instruments, viz. a capital tax,labour income tax, and consumption tax. Both analytical expressionsand simple diagrams are used to analyze the impact, transition,and long-run effects of tax policy changes. It is shown thata part of the long-run incidence of capital and consumptiontaxes falls on capital when households' horizons are finitewhereas labour would fully bear the burden of these taxes inan infinite-horizon model.     

Unemployment, Poverty and Income Disparity in Urban China

This paper studies the issues of unemployment and poverty that have been appearing recently in urban China. It estimates the urban unemployment rate, poverty rate and income disparity using a new sample survey data set. Meanwhile, it analyzes the relationship between unemployment and poverty, and the effects of poverty on urban inequality. The main findings are that: (i) the urban unemployment rate reached 11.6% in 1999 and was a major cause of urban poverty; (ii) growing urban poverty is becoming the significant source of worsening urban inequality; and (iii) migrant households have an increasing influence on urban poverty and the pattern of urban income distribution. The paper concludes that urban income distribution has worsened since 1995, and urban unemployment and poverty are the major factors in this worsening.     

Tax Pot Episodes in OECD Countries

How to use an unexpected increase in tax revenues (tax pots) was an important issue in most OECD countries in the second half of the 1990s, the question being more precisely what to do with those windfall revenues: decrease taxes, reduce debt, increase expenditures? In this paper, we study such tax pot episodes in OECD countries over the past 40 years. To that end, we propose a definition of a fiscal pot episode. Once identification is complete, we examine the macroeconomic environment within in those episodes, the way this surplus of revenues has been used, and the degree of success in reducing public debt and in fostering growth. As in the fiscal adjustment literature, we then obtain relatively orthodox conclusions about the use of windfall tax revenues, as it is generally better for future growth and debt level to use the money to reduce expenditures and taxes. J. Japan. Int. Econ., December 2002, 16(4), pp. 436–461. University of Toulouse (IDEI), Toulouse, France; and University of Toulouse (GREMAQ, LEERNA, and IDEI), Toulouse, France, Institut Universitaire de France, and CEPR. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E6, H6.