The combined incidence of taxes and public expenditures in the Philippines

Shantayanan Devarajan and Shaikh I. Hossain

No 1543, Policy Research Working Paper Series from The World Bank

Abstract: Incidence studies of fiscal policy in developing countries typically examine either the distribution of tax burdens or the incidence of public expenditures. But the central issue for policymakers is the combined or net incidence of fiscal activities. One reason that combined incidence studies are so rare is that they require detailed data on both taxation and public spending. The authors show that the net incidence of fiscal policy in a country with average data - the Philippines - can be estimated using a variety of data sources and tools, using simplifying assumptions. For 20 years, the Philippine economy has experienced a series of balance of payments crises triggered by fiscal crises. It has had an unsatisfactory record of poverty alleviation. The authors examine net fiscal incidence to find out how poverty will be affected by the rise in taxes and the cut in spending. They found that: 1) the incidence pattern of taxes is basically neutral. Contrary to expectations, indirect taxes are only slightly regressive; and 2) it is the pattern of expenditures that drives the combined incidence, which is progressive.

Keywords: Public Sector Economics&Finance; Environmental Economics&Policies; Health Systems Development&Reform; Economic Theory&Research; Health Economics&Finance; Environmental Economics&Policies; Public Sector Economics&Finance; Economic Theory&Research; Health Economics&Finance; Banks&Banking Reform (search for similar items in EconPapers)
Date: 1995-11-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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