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

Author

Listed:
  • Elineema Kisanga
  • Vincent Leyaro
  • Wahabi Matengo
  • Michael Noble
  • Helen Barnes
  • Gemma Wright

Abstract

This paper explores the distributional impact of lowering the value-added tax rate for standard-rated items in Tanzania Mainland. Using a static tax-benefit microsimulation model—TAZMOD—which is underpinned by data derived from the Household Budget Survey 2017/18, reductions in value-added taxes from 18 per cent to 17 per cent and 16 per cent are simulated. The revenue losses and impact on poverty are estimated.

Suggested Citation

  • Elineema Kisanga & Vincent Leyaro & Wahabi Matengo & Michael Noble & Helen Barnes & Gemma Wright, 2021. "Assessing the distributional impact of lowering the value-added tax rate for standard-rated items in Tanzania and options for recouping revenue losses," WIDER Working Paper Series wp-2021-38, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2021-38
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    References listed on IDEAS

    as
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    3. Christian Ebeke & Helene Ehrhart, 2012. "Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies," Journal of African Economies, Centre for the Study of African Economies, vol. 21(1), pages 1-27, January.
    4. André Decoster & Jason Loughrey & Cathal O'Donoghue & Dirk Verwerft, 2010. "How regressive are indirect taxes? A microsimulation analysis for five European countries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(2), pages 326-350.
    5. Michael Keen, 2014. "Targeting, cascading and indirect tax design," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 7(2), pages 181-201, November.
    6. Asiya Maskaeva & Zanda Bochkaeva & Joel Mmasa & Mgeni Msafiri & Eric Iramba, 2019. "Microsimulation analysis of the impact of indirect tax benefits on income distribution and poverty alleviation in Tanzania: An application of TAZMOD," WIDER Working Paper Series wp-2019-16, World Institute for Development Economic Research (UNU-WIDER).
    7. Fjeldstad, Odd-Helge & Kagoma, Cecilia & Mdee, Ephraim & Sjursen, Ingrid Hoem & Somville, Vincent, 2020. "The customer is king: Evidence on VAT compliance in Tanzania," World Development, Elsevier, vol. 128(C).
    8. Asiya Maskaeva & Joel Mmasa & Nicodemas Lema & Mgeni Msafiri, 2019. "The Impact of Fiscal Policy on Income Distribution in Tanzania: A Computable General Equilibrium Analysis," Working Papers MPIA 2019-07, PEP-MPIA.
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    Keywords

    Value-added tax; Microsimulation; Redistribution; Revenue; Tanzania;
    All these keywords.

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