Informality, Consumption Taxes and Redistribution

Pierre Bachas, Lucie Gadenne and Anders Jensen
Additional contact information
Pierre Bachas: World Bank Research
Anders Jensen: Harvard Kennedy School and NBER

No 945, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Can taxes on consumption redistribute in developing countries? Contrary to consensus, we show that taxing consumption is progressive once we account for informal consumption. Using household expenditure surveys in 32 countries we proxy for informal consumption using the type of store where purchases occur. We establish that the budget share spent in informal stores steeply declines with income, so that richer households pay a substantially larger share of their income in taxes. Our findings imply that the widespread policy of exempting food from taxation is hard to justify on equity grounds in low-income countries.

Keywords: Budget Surveys; Inequality; Informality; Redistribution; Taxes. (search for similar items in EconPapers)
JEL-codes: E26 H21 H23 (search for similar items in EconPapers)
Date: 2022-12-09
New Economics Papers: this item is included in nep-des, nep-iue, nep-lam, nep-mac and nep-pbe
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Informality, Consumption Taxes, and Redistribution (2024)
Working Paper: Informality, Consumption Taxes and Redistribution (2021)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
Working Paper: Informality, Consumption Taxes and Redistribution (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:945

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