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A poverty-focused evaluation of commodity tax options

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  • B. Essama-Nssah

    (Poverty Reduction Group, The World Bank, NW, Washington, D.C.)

Abstract

The difficulties faced by many developing countries in raising revenue from direct taxes have forced them to rely heavily on indirect taxes to finance development interventions. The purpose of this paper is to illustrate how to identify socially desirable options for commodity taxation in the context of a poverty reduction strategy. Within the logic of social evaluation we assess tax options on the basis of value judgments underlying members of the additively separable class of poverty measures. The criterion hinges on both the pattern of consumption of each commodity and the price elasticity of the poverty measure used. An application of this methodology to data for Guinea shows that many components of food expenditure (particularly cereals, grains and roots) would be good candidates for exemption from VAT. Even though expenditure on health and education is distributed in favour of the non-poor, their importance for human capital development argues for a program of targeted subsidies in a broader context of cost recovery. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • B. Essama-Nssah, 2007. "A poverty-focused evaluation of commodity tax options," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(8), pages 1114-1130.
    • Handle: RePEc:wly:jintdv:v:19:y:2007:i:8:p:1114-1130
    DOI: 10.1002/jid.1388
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    References listed on IDEAS

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    1. Sami Bibi & Jean-Yves Duclos, 2007. "Poverty-decreasing indirect tax reforms: Evidence from Tunisia," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 165-190, April.
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    Cited by:

    1. Roy Katayama & Andrew Dabalen & Essama Nssah & Guy Morel Amouzou Agbe, 2017. "Welfare and Poverty Impacts of Cocoa Price Policy Reform in Cote d'Ivoire," World Bank Publications - Reports 29625, The World Bank Group.
    2. Essama-Nssah, B., 2008. "Assessing the redistributive effect of fiscal policy," Policy Research Working Paper Series 4592, The World Bank.
    3. Backiny-Yetna, Prospère & Wodon, Quentin, 2010. "Pauvreté en Guinée de 1994 à 2007: Tendances, perceptions, et priorités des ménages [Poverty in Guinea from 1994 to 2007: Trends, Perceptions, and Household Priorities]," MPRA Paper 34380, University Library of Munich, Germany.
    4. Essama-Nssah, B. & Bassole, Leandre, 2010. "A counterfactual analysis of the poverty impact of economic growth in Cameroon," Policy Research Working Paper Series 5249, The World Bank.

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