| 20 January, Thursday (10:30am-12:30pm) Session 1C: Socioeconomic Issues |
The Distributional Impacts of Fiscal Policy: The Case of the Philippines
Author/s: Hyun Son
The distributional impacts of fiscal policies are instrumental in reducing inequality in countries like the Philippines, where inequality has been persistently high. This paper assesses how equitable various taxes and transfers in the Philippines are by deriving the social welfare elasticity of Atkinson and Sen’s social welfare functions and introducing a welfare reform index. Among various income sources, the paper finds that wage and salary incomes and international remittances were regressive. In contrast, domestic transfers and family subsistence activities were found to be progressive. The paper assesses the Philippine tax system to be overall regressive. Although income tax was found to be progressive, it only generates little revenue, suggesting its limited impact on inequality reduction. The poor bear much of burden of indirect taxes on individual commodities such as food, alcohol and tobacco since they tend to allocate a greater portion of their incomes to such commodities relative to the nonpoor.
JEL codes: H23, H24, H31, H53, I38