The impact of fiscal policy on income distribution in Tanzania: A computable general equilibrium analysis
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Date
2019
Journal Title
Journal ISSN
Volume Title
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SSRN
Abstract
The Tanzanian government has established a goal to transform the country into a middle-income
and semi-industrialized state by 2025. To promote this transformation, the government exempted the
Value Added Tax on capital commodities in FY 2017-2018 as a way to promote utilization of these
commodities by manufacturing industries and generate growth, employment, and increased
incomes. This study analyzes the impact of a reduction in Value Added Tax on capital commodities
(electricity, vehicles, machinery, and equipment) under two different closure rules: (1) fixed
governmental expenditures and flexible governmental savings (2) flexible governmental
expenditures and fixed governmental savings. Under the first regime, government savings declined
and industries that depended heavily on government investments suffered. In the second, output
increased for all industrial sectors, leading to a decrease in average unemployment. Real
consumption increased for all but the richest household categories.
Description
Full Text Report. Also available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405460
Keywords
Fiscal Policy, Government budget, Household income, CGE modelling, Social accounting matrix, Income distribution, Value Added Tax, VAT, Tax, Revenue, Capital commodity, Government expenditures
Citation
Maskaeva, A., Mmasa, J., Lema, N., & Msafiri, M. (2019). The impact of fiscal policy on income distribution in Tanzania: A computable general equilibrium analysis. Partnership for Economic Policy Working Paper (2019-07).