This report analyzes the distributional impacts of the main taxes and transfers on households’ welfare in the West Bank and Gaza. The analysis uses the Commitment to Equity methodology, enabling us to compare results to other countries where this framework has been applied. Specifically, the report assesses the effects of government taxation, social expenditure, and indirect subsidies on poverty and inequality in the West Bank and Gaza. Results indicate that the combination of taxes and transfers modelled in the West Bank and Gaza reduces inequality by 6.5 Gini points but increases the national poverty headcount by 8.4 percentage points. These fiscal policy outcomes on poverty and inequality reduction are below average in terms of desirability compared to other lower middle-income countries.
The taxes and transfers modelled in the West Bank and Gaza achieve the most inequality reduction through in-kind benefits from public basic education and public hospitals, followed by the Cash Transfer Program and the Value-Added Tax (VAT). Their large impact on inequality reduction is explained by a combination of their progressivity and their size relative to household income. The redistributive effect of direct taxes, customs, and indirect subsidies is zero or close to zero. Indirect taxes represent the fiscal interventions contributing most to the increase in national poverty; custom duties followed by the VAT represent the largest burden on households’ incomes. Direct transfers from social protection cannot offset the impoverishment effect from indirect taxes because they have very limited coverage in the West Bank and Gaza. Only the poorest decile is a net cash beneficiary after paying taxes and receiving cashable transfers. The rest of the deciles are net payers to the fiscal system. To decrease poverty and inequality in the West Bank and Gaza, the most significant policy recommendation to emerge from the analysis is to expand direct transfers to deciles 2 and 3 to compensate for indirect tax burdens. Financing this reform is feasible through domestic tax mobilization or through rationalization of inefficient fuel and electricity subsidies that benefit the top-income deciles most.
Repository name | URI |
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Reproducible Research Repository (World Bank) | https://reproducibility.worldbank.org |
Paper exhibits were attempted to be reproduced in a computer with the following specifications:
• OS: Windows 10 Enterprise, version 21H2
• Processor: Intel(R) Xeon(R) CPU E7-4890 v2 @ 2.80GHz 2.80 GHz
• Memory available: 5.9 GB
• Software version: Stata 17
~20 minutes runtime
To run the script, new users only need to change the directory of the 00_PSE_master file
Please note that some of the datasets used in this study are not available for public release. This includes datasets related to property taxes, evaluations, number of taxpayers, as well as Input-Output tables. These datasets are subject to access agreements with the National Statistical Office (NSO) and are not included in the public data package. Moreover, certain publicly accessible files have redistribution restrictions and hence cannot be included in this package. Detailed information about these restrictions can be found in the aforementioned entries.
Researchers who wish to replicate this study or need access to these datasets for verification purposes should contact the corresponding author at afinn1@worldbank.org for further guidance and assistance.
Author | Affiliation | |
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Beenish Amjad | World Bank | bamjad@worldbank.org |
Haydeeliz Carrasco | World Bank | hcarrasconunez@worldbank.org |
Arden Finn | World Bank | afinn1@worldbank.org |
Maya Goldman | World Bank | mgoldman@worldbank.org |
2024-01
Location | Code |
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Palestine | PSE |
The materials in the reproducibility packages are distributed as they were prepared by the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this event do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank, or the governments they represent. The World Bank does not guarantee the accuracy of the materials included in the reproducibility package.
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Modified BSD3 | https://opensource.org/license/bsd-3-clause/ |
Name | Affiliation | |
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Arden Finn | World Bank | afinn1@worldbank.org |
Reproducibility WBG | World Bank | reproducibility@worldbank.org |
Name | Abbreviation | Affiliation | Role |
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Reyes Retana | MRR | World Bank | Junior Data Scientist |
2024-01-17
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