Fiscal Incidence and Poverty Reduction: Evidence from Tunisia

Applying standard fiscal incidence analysis to the National Survey of Consumption and Household Living Standards for 2010, this paper estimates the impact of Tunisia's tax and transfer system on inequality and poverty and assesses who benefits from public spending on education and health. Our results show that Tunisia fiscal policy reduces inequality and extreme poverty through redistributive public spending. However, the headcount ratio with the national poverty increases implying that a large number of the poor pay more in taxes than what they receive in cash transfers and subsidies. This is due to a relatively high burden of personal income taxes and social security contributions for low-income households.