Ideas to Action:

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Views from the Center

CGD experts offer ideas and analysis to improve international development policy. Also check out our Global Health blog and US Development Policy blog.

 

On the Equity-Friendly Property Tax: Time for Developing Countries to Invest?

A large proportion of revenue gains over the last two decades has come from countries’ efforts to improve the design and compliance of consumption and other indirect taxes, particularly the VAT (value-added tax); in doing so, the objective has been to  minimize VAT’s regressive effects by exempting sales of small businesses below a threshold (where the poor typically tend to buy) as well as imposing zero tax on certain food and other products which take up a large proportion of consumption of poor households. Less attention has gone to expanding the coverage of potentially more progressive taxes, such as personal income and property taxes.

On Inequality, Redistribution, and Wishful Thinking

A key goal of tax-and-spending policies is to alleviate poverty by redistributing income from the haves to the have-nots. The extent that this is possible depends on the balance between the number of higher earners and the number of poor people, and the efficiency of the mechanisms used.