Tax, Welfare and Inequality

Image credit: © Johnny Miller, Goya Bauwens

Tax policy and tax administration can have a big impact on who does or does not pay their fair share, on economic incentives, and thus on levels of poverty and the distribution of income and welfare. Research under this theme focuses on developing a better understanding, in specific contexts, of the complex economic and political linkages between how governments tax, how their national economies perform, and how well their citizens live. Some of our specific concerns are: the taxation of high net worth individuals; efficient business taxation; and the taxation of socially-harmful activities like smoking tobacco.

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Publications:

December 2021
Informal Workers and the State: The Politics of Connection and Disconnection During a Global Pandemic
by Max Gallien & Vanessa van den Boogaard

In low- and middle-income countries, informal workers are particularly vulnerable to the health and economic effects of the Covid-19 pandemic and often neglected by policy responses. At the same time, the crisis is rapidly changing the ways that states engage with informal workers. We argue that the relationships between informal workers and states – and…

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November 2021
Assessing the Equity and Redistributive Effects of Taxation Reforms in Nigeria
by Henry C. Edeh

Achieving the Sustainable Development Goals (SDGs) of poverty and inequality reduction through redistribution have indeed become critical concerns in many low- and middle-income countries, including Nigeria. Although redistribution results from the effect of tax revenue collections, micro household-level empirical analyses of the distributional effect of personal income tax (PIT) and value added tax (VAT) reforms…

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Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis
by Neil McCulloch, Tom Moerenhout & Joonseok Yang

Fuel subsidies in Nigeria are enormous – around USD 3.9 billion – almost double the health budget. Such subsidies come at great cost: the opportunity costs of such spending on other development objectives are large; the distribution of resources to the state governments is reduced; the vast majority of the subsidy goes to better off Nigerians; and…

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More on the Positive Fiscal and Health Effects of Increasing Tobacco Taxes in Nigeria
by Corné van Walbeek, Adedeji Adeniran & Iraoya Augustine

Nigeria is faced with substantial economic and health burdens caused by tobacco smoking. The economic burden of smoking accounts for approximately 1.3 per cent of Nigeria’s GDP. In terms of its health impact, 4.9 per cent of all deaths in 2019 were attributed to smoking related diseases. The thousands of Nigerians that die annually from…

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The Economic Impact of the Pandemic in Rwanda: An Analysis of Firm-level VAT Data
by Giulia Mascagni & Adrienne Lees

There are substantial differences in the spread of the pandemic and the policy response to it between high and low-income countries (LICs). In terms of case numbers, the pandemic has affected high and middle income countries (HICs and MICs) much more severely than LICs: deaths per million people have remained typically well below 1 in…

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Using administrative data to assess the impact of the pandemic in low-income countries: An application with VAT data in Rwanda
by Giulia Mascagni & Adrienne Lees

This paper uses administrative data from Value Added Tax (VAT) returns to provide insights on the impact of the COVID-19 pandemic in Rwanda. We show that the lockdown in Rwanda had a severe impact on the domestic economy, despite relatively low case numbers. However, the economy quickly rebounded after restrictions were lifted, with overall sales…

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March 2021
Explaining Informal Taxation and Revenue Generation: Evidence from south-central Somalia
by Vanessa van den Boogaard & Fabrizio Santoro

Most people in low-income countries contribute substantially to the financing of local public goods through informal revenue generation (IRG). However, very little is known about how IRG works in practice. We produce novel evidence on the magnitude and regressivity of IRG and its relationship with the state in a fragile context, Somalia. We rely on…

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November 2020
Fiscal and Public Health Impact of a Change in Tobacco Excise Taxes in Ghana
by Ama Pokuaa Fenny, Aba Obrumah Crentsil, Christian Kwaku Osei & Felix Ankomah Asante

Cigarettes have generally become less affordable over time in developed economies, with increased taxes and low income growth, but more affordable in developing countries, where there have been minimal changes in taxes (Chaloupka et al. 2019). Studies by the WHO suggest that 80% of the world’s smokers live in low- and middle-income countries (LMICs), and…

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Fiscal and Public Health Impact of a Change in Tobacco Excise Taxes in Ghana
by Ama Pokuaa Fenny, Aba Obrumah Crentsil, Christian Kwaku Osei & Felix Ankomah Asante

This paper predicts the fiscal and public health outcomes from a change in the excise tax structure for cigarettes in Ghana. More than 5,000 people are killed by diseases caused by tobacco every year in Ghana (Tobacco Atlas 2018). Currently the country has a unitary tax administration approach, with a uniform ad valorem tax structure…

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July 2020
How Can Governments of Low-Income Countries Collect More Tax Revenue?
by Mick Moore & Wilson Prichard

In this chapter, Moore and Prichard provide two different kinds of answers to the question of how governments of developing countries can increase tax revenues. First, they discuss seven potential revenue sources that governments of developing countries tend to use less than they should. Mining, tobacco and alcohol, the incomes and wealth of rich people,…

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Blogs:

November 2021
by Erika Siu & Jeffrey Drope

The ninth session of the Conference of the Parties to the World Health Organization Framework Convention for Tobacco Control (or COP 9) wrapped up on November 13. The discussions saw 161 countries, UN agencies, other intergovernmental organisations and civil society groups consider strategies to implement tobacco control measures more effectively, including taxation, and to stop…

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November 2021
by Max Gallien, Mike Rogan & Vanessa van den Boogaard

Many low and middle-income countries face a myriad of challenges. But policies that can address them are few and far between. The challenges include high and rising inequality, budget crises and the ongoing pandemic. In a set of recent outputs, the World Bank and the International Monetary Fund (IMF) presented an approach that they argue can tackle all three…

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October 2021
by Corné van Walbeek & Zunda Chisha

Rapid population growth, increased advertising by the tobacco industry, and growing tobacco consumption among young people in Africa all contribute to a projected massive tobacco-related burden of disease. The World Health Organisation (WHO) estimates that one in five African adolescents use tobacco. The WHO also forecast a doubling of deaths related to tobacco use in low- and middle-income countries between 2002 and 2030. There…

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Research Projects:

Current Project
Tobacco tax reform in West Africa
Project Researchers: Prof Corné van Walbeek, REEP, Dr Hana Ross, REEP, Prof Abdoulaye Diagne, CRES, Dr Pape Yona Mané, CRES & Kisten van der Zee, REEP

See the project’s factsheets on tobacco taxation in West Africa Purpose Africa is vulnerable to the tobacco industry. It has a large and young population, rapid economic growth, a desire to attract foreign investment, and weak tobacco control policies. Although smoking prevalence in many African countries is modest, preventing its rise, especially amongst youth, remains…

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Past Project
The fiscal and public health impact of a change in tobacco excise taxes in Ghana
Project Researchers: Ama Fenny, University of Ghana, Felix Asante, Aba Crentsil & Christian Osei

This study will provide evidence-based analysis of tobacco taxation in Ghana. The main research theme addressed will be to assess best practices in tobacco taxation centering on the impact of tobacco tax increases on the retail price of tobacco products, tobacco consumption and government tax revenue. We hypothesize that this will provide the evidence needed…

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Past Project
Estimating the Impact of Tax or Price Measures on Tobacco Smoking Onset and Cessation
Project Researchers: Precious Akanonu

This study seeks to contribute to the scant literature on the impact of prices on smoking onset and cessation in LMICs by investigating the following research questions, with a focus on Nigeria: What is the impact of cigarette prices on smoking onset? What is the impact of cigarette prices on smoking cessation? The study is…

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