Tax Reforms and Macroeconomic Stabilization in Mozambique

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: Between 1997 and 2003 several tax reforms were carried out in Mozambique in order to increase tax revenues. This study analyses the revenue and stabilisation effects of these tax reforms. The revenue effects are evaluated through both the quality of the reforms – through their accordance with the recommendations of uniform taxation – as well as the quantitative effects on the level and composition of tax revenue. The stabilisation effects are evaluated through a comparison of the change in the fiscal deficit with the changes in the current account deficit and the rate of inflation. The major conclusion drawn in this study is that the implemented tax reforms increased tax revenues significantly and contributed to a slight reduction of the fiscal deficit, which in turn contributed to macroeconomic stabilisation to some extent. If expenditure efficiency can be improved and if additional revenue-generating reforms can be implemented, tax revenues can contribute to stabilisation to a larger extent in the future.

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