Poverty reduction through fiscal restructuring: An application to Thailand

A method is developed to simulate the impact that changes in the composition of taxes and public expenditures may have on poverty incidence and inequality. The paper then applies this framework to Thailand. We find that significant effects on poverty can be achieved though moderate, once-only redistributions of the total tax burden towards taxes that fall predominantly on the rich, including personal and corporate income taxes, and comparable reallocations of public expenditures towards those that most benefit the poor, including health and agricultural expenditures. Moreover, combining pro-poor reallocations of taxes and expenditures can increase the poverty-reducing capacity of economic growth.