Abstract
This paper develops a framework to assess the growth and distribution effects of fiscal resources. Resources are classified as debt, other capital receipts, foreign aid and other unilateral grants, non-tax revenue, including resource rents, seigniorage, and taxes. The framework is used to assess the fiscal resource bases of economies in developing Asia to the extent permitted by available data. Although there is great diversity in the amount of resources raised in terms of the importance of different revenue sources and in the sophistication of revenue administrations, the analysis suggests that in order to expand their relatively low fiscal resource bases, developing Asian economies need to pay greater attention to non-tax revenue and to taxes other than broad-based taxes on income and consumption, such as property taxes and corrective taxes.
Highlights
This paper looks at the economic growth and income distribution effects of fiscal policy instruments for raising resources
How fiscal resources are related to major national characteristics like per capita income, its distribution, and good governance in developing Asia is examined in Figures 2 to 5.36 As the figures show, revenue is only mildly positively related to gross domestic product (GDP) per capita (PPP) and its inequality as measured by the Gini Index
The “Paying Taxes” ranking from this survey measures the burden on businesses of paying taxes according to a number of indicators, including the time it takes to make tax payments, the number of tax payments needed per year, and the actual tax paid as a percentage of profits
Summary
This paper looks at the economic growth and income distribution effects of fiscal policy instruments for raising resources. Inclusive economic growth can be taken to encompass income growth in which no socioeconomic group is deprived of growth benefits. Weak groups can include the poor, the handicapped, the illiterate, children, indigenous peoples, and some women. Included are unemployed workers, and victims of war and natural disasters. Fiscal policy is inclusive if it deploys instruments promoting inclusion in addition to promoting its traditional goals of growth and macroeconomic stability. Non-income dimensions of inclusion are ignored, so inclusive economic growth is growth with static or falling poverty and inequality. This paper looks only at instruments used to raise fiscal resources
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