Tax Incidence Analysis of Developing Countries: An Alternative View

Abstract

Misleading conclusions can be drawn from studies of tax incidence that ignore the special features of developing countries. Incorporating these features can sometimes reverse the incidence pattern of taxes relative to what is often taken to be conventional wisdom. Even where patterns are not reversed, quantitative differences can be substantial. The “newer” views of incidence have implications for tax restructuring options being considered in several developing countries. The proposed restructuring may appear to lead only to a more regressive tax system because of improper incidence analysis.