Poverty Reducing Indirect Tax Reforms in Malawi

Abstract

This paper focuses on the reduction of poverty in Malawi through indirect tax reforms. In methodology, it implements a new indirect tax reform of consumption dominance curves based on six combinations of elements that are essential to people’s living standard in Malawi. The goal of these tests is to find whether a change in marginal tax distribution would alleviate the poverty of Malawi. Some results imply positive effects on the reduction of poverty. This may lead to possibility of indirect tax reform in this country. Also, it is based on specific assumptions of poverty line and efficiency cost. Therefore under those conditions Malawi could develop by relying on redistribution of tax on Food, Housing, Medical, Electricity, with nonfood consumption.