How should an optimal tax system react to a crisis?: Simulation results for Zambia

Dingquan Miao, Ravi Kanbur and Jukka Pirttilä

No wp-2023-149, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The COVID-19 pandemic increased public debt and changed the income distribution in many countries. We use a numerical simulation approach to derive optimal nonlinear marginal tax rates for the pre-crisis and crisis periods. We contribute to the literature by examining optimal tax rates numerically for a developing country and by investigating how the tax rates should be changed as a response to a crisis. Our results indicate that the actual extent of redistribution, especially via direct transfers to low-income individuals, should be considerably higher than what the present system offers.

Keywords: COVID-19; Pandemic; Optimal tax; Income tax; Simulation; Welfare impact (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cmp, nep-pbe and nep-pub
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