Poverty-Decreasing Indirect Tax Reforms: Evidence from Tunisia
University of Tunis - Faculty of Economics
Laval University; Institute for the Study of Labor (IZA)
CIRPEE Working Paper No. 04-03
This paper suggests a methodology to identify socially-desirable directions for poverty-alleviating tax reforms. The cost-benefit ratio of increasing any commodity-tax rate is derived from the minimization of a poverty measure subject to a revenue requirement for the government. Further, to avoid the arbitrariness of choosing a poverty line and a poverty measure, the search for a poverty-reducing tax reform is done robustly, among other things by increasing progressively the ethical content of a pre-defined class of poverty measures. The methodology is illustrated using data from Tunisia. The results suggest that poverty could be dropped for a large class of poverty indices and a wide range of poverty lines by raising - at constant fiscal revenue - the subsidy rate on hard wheat and mixed oils and by decreasing the one on sugar and milk.
Number of Pages in PDF File: 25
Keywords: Poverty alleviation, Indirect taxation, Targeting, Tunisia
JEL Classification: D12, D63, H53, I32, I38working papers series
Date posted: February 16, 2004
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