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Equity and Efficiency Tradeoff in Bangladesh Tax Policy Reform: A Computable General Equilibrium Model

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  • Osman H. Chowdhury

    (University of the Philippines)

Abstract

This study has employed a computable general equilibrium (CGE) tax model for Bangladesh to directly assess the efficiency and equity effects of a set of proposed tax reforms, particularly excise tax, import tariff, direct tax and value-added tax. It has been found that pure excise tax reforms in the short run for resource mobilization have undesirable consequences on both efficiency and equity grounds. Tariff liberalization may enhance welfare even in the short run. But it is only through simultaneous reforms in all taxes that both equity and e?iciency can be improved. A limited VAT stands out as a better alternative to excise taxes on e?iciency ground but may not be a desirable policy option on equity ground in the short run. The overall results would point out that any single indirect tax reform can not be relied upon for favorable income redistribution in the short run.

Suggested Citation

  • Osman H. Chowdhury, 1989. "Equity and Efficiency Tradeoff in Bangladesh Tax Policy Reform: A Computable General Equilibrium Model," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 26(2), pages 262-286, December.
    • Handle: RePEc:phs:prejrn:v:26:y:1989:i:2:p:262-286
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/download/283/431
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    Cited by:

    1. Schweickert, Rainer & Wiebelt, Manfred, 1996. "Finanzpolitik im Aufholprozeß: Lehren aus Europa, Lateinamerika und Asien," Open Access Publications from Kiel Institute for the World Economy 1689, Kiel Institute for the World Economy (IfW Kiel).
    2. Hoque, Serajul, 2008. "The macroeconomic, industrial and distributional effects of removing tariffs in Bangladesh," MPRA Paper 9577, University Library of Munich, Germany.

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