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The economics and politics of taxation and social protection

This project takes an innovative and integrated approach to the study of taxation and social protection systems in developing countries. Taking a system-wide perspective to these issues allows for the exploration of the combined fiscal effect of tax and benefit reforms, both in terms of resource mobilization, economic efficiency and distributional impact.

In recent years social protection has emerged as a key policy strategy against poverty and vulnerability in many developing countries. It has evolved into a wide number of different forms in terms of focus and targeting population, coverage, scope, and design features, with some programmes providing income transfers alone, while others combining income transfers with the utilization of social services and assets.

However, financing remains a key constraint. Revenue mobilization strategies have been explored in some developing countries to finance social protection. These include reforms on natural resource taxes, royalties, and fees; shifting expenditure from subsidies and tax exemptions to social protection, and redistribution. Efforts to increase the tax capacity by making the tax administration work more efficiently and by broadening the tax base are often essential, although the feasibility of these strategies often depend on political economy considerations.

This UNU-WIDER project seeks to provide researchers, policy-makers and practitioners with tools to improve the methods of analysis of current incidence of tax and social protection systems as well as the potential distributional impacts of tax and benefit reforms. It explores microsimulation analysis, register-based tax research, and political economy models of social protection to contribute to the capacity of developing countries to create effective social protection systems.

The project will produce among other things:

  • a new, purposely built database on Social Protection Systems in Developing Countries
  • analytical tools based on microsimulation models of social protection and tax system reforms
  • political economy models of taxation and social protection.

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Main subject

Theme: Current, Inclusion