Fiscal Incidence in Tanzania

We use methods developed by the Commitment to Equity and data from the 2011/12 Household Budget Survey to assess the effects of government taxation, social spending, and indirect subsidies on poverty and inequality in Tanzania. We also simulate several policy reforms to assess their distributional consequences. We find that Tanzania redistributes more than expected given its relatively low income and inequality, largely because both direct and indirect taxes are more excellent targeting mechanism. If the program were expanded to a size that is typical for lower-middle income countries, it could reduce poverty significantly. On the other hand, electricity subsidies are regressive despite attempts to make them more pro-poor with a lifeline tariff.