Tax burden and poverty in lower-middle-income countries: the moderating role of fiscal freedom

Tax burden and poverty in lower-middle-income countries: the moderating role of fiscal freedom

Blog Article

This study examines the complex relationship between tax burden, fiscal autonomy, and poverty in 24 lower-middle-income countries, highlighting the moderating role of the Fiscal Freedom.Using a dataset from 2013 to 2019 and Structural Equation Modeling, the findings confirm that all hypotheses are supported, with the Critical Ratio values for the relationship coefficients exceeding 1.96.

The results indicate that higher tax here rates and taxes on goods and services exacerbate poverty, disproportionately affecting low-income households by reducing disposable income and purchasing power.The Fiscal Freedom Index significantly moderates these effects, intensifying the socio-economic impact of taxation.Countries with greater fiscal autonomy experience amplified consequences, underscoring the paradox of fiscal freedom: while it enables policy flexibility, it can also deepen economic disparities if not managed effectively.

Policy implications suggest the adoption of progressive taxation, exemptions for essential goods from consumption taxes, and strategic allocation of tax revenues to targeted social welfare programs.Strengthening tax administration to enhance compliance and efficiency is also crucial.These measures aim to reconcile fiscal sustainability with poverty alleviation, ensuring that tax policies contribute to equitable and inclusive economic growth.

This study provides empirical insights for policymakers seeking to design tax systems that mitigate pet calming peanut butter poverty while maintaining economic stability.