The Effect of the Liberian Government’s Taxation Policies on Poverty and Inequality

Many low- and middle-income countries have little capacity to mobilise revenue, and a high level of socioeconomic inequality. In Liberia these issues have been exacerbated by regional and global crises that reduced economic performance and living standards, such as the outbreak of Ebola in 2014 and Covid-19 in 2020. Tax policy reforms can play a crucial role in such a difficult economic and social environment, simultaneously increasing tax revenue and improving equity by reducing the tax burden on relatively poorer individuals. However, little is known about the extent to which tax policy reforms affect poverty and inequality, especially at the household level.

This study assesses the effect on poverty and income inequality resulting from reform of personal income tax (PIT) and goods and services tax (GST) in Liberia. In particular, it evaluates the impact of amendments to the Revenue Code of the 2000 Act through the Tax Amendment Acts of 2011 and 2016, which reformed the PIT structure (2011) and the GST rate (2016).

Summary of Working Paper 210 written by Henry Edeh.