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Household Welfare And Poverty Impact Of Domestic Revenue Mobilisation Strategies In Nigeria: A Computable General Equilibrium (Cge) Analysis

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This study aims to simulate the household welfare and poverty impact of Nigeria's recent increase in the Value Added Tax (VAT) rate policy from 5 per cent to 7.5 per cent relative to an increase in either the Company Income Tax (CIT) rate or Personal Income Tax (PIT) rate. These increases in the tax rate policies were examined. This is done by linking a Standard Computable General Equilibrium (CGE) framework to Micro-simulation (MS) models. Within this framework, the choice of a Domestic Revenue Mobilisation (DRM) strategy is based on the criteria of maximum revenue generation with minimum welfare loss as well as a tolerable poverty state. Findings from this study rule out the public perception that an increase in the CIT rate from 30 per cent to 35 per cent will result in more government revenue. Specifically, the study revealed that the choice of a DRM strategy in Nigeria involves a tradeoff between maximum revenue generation and minimum welfare loss as well as a tolerable poverty state.

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  • Umar Bambale, Ibrahim & Sanusi Rafindadi, Aliyu & Usman Bello, Adamu, 2022. "Household Welfare And Poverty Impact Of Domestic Revenue Mobilisation Strategies In Nigeria: A Computable General Equilibrium (Cge) Analysis," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 9(2), pages 1-13, June.
    • Handle: RePEc:ris:ilojep:0058
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    3. Keshab Bhattarai & Dung Thi Kim Nguyen & Chan Van Nguyen, 2019. "Impacts of Direct and Indirect Tax Reforms in Vietnam: A CGE Analysis," Economies, MDPI, vol. 7(2), pages 1-36, May.
    4. Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
    5. Adoho,Franck M. & Gansey,Romeo Jacky, 2019. "Welfare Impact of Value-Added Tax Reform : The Case of the Democratic Republic of Congo," Policy Research Working Paper Series 8923, The World Bank.
    6. Ingvil Gaarder, 2019. "Incidence and Distributional Effects of Value Added Taxes," The Economic Journal, Royal Economic Society, vol. 129(618), pages 853-876.
    7. Alarudeen Aminu, 2019. "A recursive dynamic computable general equilibrium analysis of value-added tax policy options for Nigeria," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-38, December.
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    More about this item

    Keywords

    CGE model; Household welfare and Poverty; Tax reform; Nigeria;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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