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

Arbeitspapier

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. Because the crisis increased pre-tax inequality, the tax system should become more redistributive as a response to a crisis. We also demonstrate how a combination of a higher revenue requirement before the crisis and a lower revenue requirement after the crisis increases social welfare.

Objekt anzeigen

• ISBN: 978-92-9267-457-1
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: WIDER Working Paper ; No. 2023/149

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation
• Thema: COVID-19 pandemic ; optimal income taxation ; numerical simulation ; welfare analysis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Miao, Dingquan ; Kanbur, Ravi ; Pirttilä, Jukka
• Ereignis: Veröffentlichung
• (wer): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (wo): Helsinki
• (wann): 2023

Weitere Informationen

• DOI: doi:10.35188/UNU-WIDER/2023/457-1
• Handle: http://hdl.handle.net/10419/283845