Chapter

Pro-poor fiscal strategies

Paul Mosley

in The Politics of Poverty Reduction

Published in print March 2012 | ISBN: 9780199692125
Published online May 2012 | e-ISBN: 9780191739286 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199692125.003.0005
Pro-poor fiscal strategies

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Given political stability and the existence of a pro-poor political coalition, what actions have achieved a sustained fall in poverty? This chapter focuses on fiscal policies, which have the political merit of being targetable on particular interest groups. One pro-poor pathway (represented by Uganda and Indonesia within the study’s sample) orientates expenditure policies towards low-incomerural producers and thus towards green revolution-type policies. A second (represented by Ghana, Argentina, Russia and, after 2006, Bolivia) orientates expenditure policies towards low-income consumers in the urban labour force, motivating a shift of expenditure towards social protection and housing expenditures. Taxation can also be reoriented for political motives towards the poor, as in Uganda, Ghana, Bolivia, and Argentina. However, taxation imposes a political dilemma because it is politically unpopular and the temptation in a weak state is to use aid rather than tax to finance expenditure, which over the long term weakens the state further. The chapter illustrates various ways out of this dilemma, including closing of tax loopholes, user charges, depoliticisation by establishment of an independent revenue authority, and politically imaginative sequencing.

Keywords: public expenditure; pro-poor expenditure; social protection; green revolution; taxation

Chapter.  25383 words.  Illustrated.

Subjects: Economic Development and Growth

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