Tax Revenues in Low-Income Countries

Adrian Peralta-Alva; Xuan Song Tam; Xin Tang; Marina M. Tavares

doi:10.1093/ej/uead023

Tax Revenues in Low-Income Countries

Adrian Peralta-Alva
, Xuan Song Tam
, Xin Tang^*
, Marina M. Tavares

^*Corresponding author for this work

Department of Economics and Finance

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

2 Citations (Scopus)

26 Downloads (CityUHK Scholars)

Abstract

We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss. © The Author(s) 2023.

Original language	English
Pages (from-to)	2001-2024
Number of pages	24
Journal	Economic Journal
Volume	133
Issue number	653
Online published	15 Mar 2023
DOIs	https://doi.org/10.1093/ej/uead023
Publication status	Published - Jul 2023

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Research Keywords

TAXATION
RISK
CONSUMPTION
INFORMALITY
DYNAMICS

Publisher's Copyright Statement

COPYRIGHT TERMS OF DEPOSITED POSTPRINT FILE: This is a pre-copyedited, author-produced version of an article accepted for publication in The Economic Journal following peer review. The version of record Peralta-Alva, A., Tam, X. S., Tang, X., & Tavares, M. M. (2023). Tax Revenues in Low-Income Countries. Economic Journal, 133(653), 2001-2024. https://doi.org/10.1093/ej/uead023 is available online at: https://academic.oup.com/ej/article/133/653/2001/7078559.

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title = "Tax Revenues in Low-Income Countries",

abstract = "We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss. {\textcopyright} The Author(s) 2023.",

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AU - Peralta-Alva, Adrian

AU - Tam, Xuan Song

AU - Tang, Xin

AU - Tavares, Marina M.

N1 - Research Unit(s) information for this publication is provided by the author(s) concerned.

PY - 2023/7

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N2 - We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss. © The Author(s) 2023.

AB - We quantitatively investigate the welfare costs of increasing tax revenues in low-income countries. We consider three tax instruments: consumption, labour income and capital income taxes. The analysis is based on a general equilibrium model featuring heterogeneous agents, incomplete financial markets, and rural and urban areas. We calibrate the model to Ethiopia and decompose the welfare costs into their aggregate and distributional components. We find that changing taxes alter the composition of demand. This, together with limited labour mobility, causes the incidence of higher taxes to fall disproportionately on the rural population, regardless of the instrument. Consumption taxes are the instrument with the largest welfare loss. © The Author(s) 2023.

KW - TAXATION

KW - RISK

KW - CONSUMPTION

KW - INFORMALITY

KW - DYNAMICS

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DO - 10.1093/ej/uead023

M3 - RGC 21 - Publication in refereed journal

SN - 0013-0133

VL - 133

SP - 2001

EP - 2024

JO - Economic Journal

JF - Economic Journal

IS - 653

ER -

Tax Revenues in Low-Income Countries

Abstract

Bibliographical note

UN SDGs

Research Keywords

Publisher's Copyright Statement

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