On the Poverty and Equity Implications of a Rise in the Value Added Tax

Nisreen Salti and Jad Chaaban

Middle East Development Journal, 2010, vol. 2, issue 1, 121-138

Abstract: This paper examines the impact of a rise in the Value Added Tax (VAT) on poverty and inequality in Lebanon. The paper develops an empirical model based on consumer demand theory and uses only household survey data on expenditures and spatial price indexes. The simulation results, using own and cross price demand elasticities estimated with an Almost Ideal Demand System, show that the proposed VAT rate increases will have a non-negligible impact on poverty and inequality in Lebanon, despite current VAT exemptions.

Date: 2010
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DOI: 10.1142/S1793812010000174

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