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The impact of tax-benefit systems in Africa

Cape town

The United Nations University World Institute for Development Economics Research (UNU-WIDER) has published a new Research Brief on The Impact of Tax-Benefit Systems in Africa based on the WIDER Working Paper 2019/2 ‘Learning from the ‘best’: The impact of tax-benefit systems in Africa’ by Olivier Bargain, H. Xavier Jara, Prudence Kwenda, and Miracle Ntuli, exploring the use of microsimulation to test policy reforms.

The Brief explains how microsimulation models can be used to study existing tax-benefit systems and look at how one country’s system would work if applied to the population of another.

The research has shown how exporting the South African tax-benefit system to other African countries would reduce inequality. Income poverty would be decreased by 2.2 percentage points in Mozambique and by up to 17.8 percentage points in Tanzania.

Applying the less redistributive Mozambican policies to South Africa would lead to greater inequality and increase poverty by 22 percentage points.

Microsimulation models can simulate both existing tax-benefit systems and potential alternatives. This offers us a way to assess the redistributive impact of each national tax system in comparison with the others. The SOUTHMOD project, funded by UNU-WIDER, has developed microsimulation models for six African countries, based on the original EUROMOD microsimulation model developed at ISER. These are Ghana, Zambia, Mozambique, Tanzania, Ethiopia, and South Africa.