Microsimulation analysis of the impact of indirect tax benefits on income distribution and poverty alleviation in Tanzania: An application of TAZMOD

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: This paper analyses the impacts of indirect tax policy reforms on income distribution and poverty in Tanzania by applying a standard static microsimulation model TAZMOD v1.8. The simulations model two indirect tax reforms involving changes to the excise duty and valueadded tax rates on alcoholic beverages and tobacco products, and changes to employers' and employees' contributions to the National Health Insurance Fund. The results of the first reform find a positive effect on government tax revenue and a neutral effect on income distribution and poverty. The results of the second reform find a positive effect on household income distribution and consumption. The findings show that, despite increasing unequal income distribution, poverty indicators fell. Acknowledgements:The authors are grateful to UNU-WIDER, the Ministry of Finance and Planning, and the Tanzania Revenue Authority. The results presented here are based on TAZMOD v1.0, which is developed, maintained, and managed by UNU-WIDER in collaboration with the EUROMOD team at ISER (University of Essex), SASPRI (Southern African Social Policy Research Insights), and local partners in selected developing countries (Ethiopia, Ghana, Mozambique, Tanzania, Zambia, Ecuador, and Viet Nam) in the scope of the SOUTHMOD project. The local partner for TAZMOD is the University of Dar es Salaam. We are indebted to the many people who have contributed to the development of SOUTHMOD and TAZMOD. The results and their interpretation presented in this publication are solely the responsibility of the authors.

Assessing the distributional impact of lowering the value-added tax rate for standard-rated items in Tanzania and options for recouping revenue losses

“…They further describe VAT as 'moderately progressive', based on their calculation of the concentration coefficients of different policies (2016: 271). Maskaeva et al (2019a) use TAZMOD to explore the impact of increasing VAT and excise on alcoholic beverages and tobacco products in order to finance additional healthcare services.…”

An analysis of the distributional impact of excise duty in Uganda using a tax-benefit microsimulation model

“…The concern therefore is the progressivity of indirect taxes, which is documented to be less than that for direct taxes. In many countries, microsimulation models have been widely used to analyse redistributive aspects of tax policy reforms (e.g., Bourguignon and Spadaro 2006;Decoster et al 2011;Leahy et al 2011;Maskaeva et al 2019). Microsimulation models are desirable because they are less costly and time-consuming than field-based impact evaluation studies.…”