As governments in low- and middle-income countries increase their expenditure, additional revenues need to be raised in an efficient and equitable way. In order to help with this task, we have a growing research programme on tax and social security system issues.
Our early work involved the development of microsimulation models to analyse the distributional and potential behavioural effects of reforms to taxes in Mexico and El Salvador, and pensions in Chile, making use of large household surveys. IFS researchers have also considered the lessons of the Mirrlees Review for middle-income countries, and examined the design of corporate income taxes in developing countries.
More recently, we have begun working directly with Ministries of Finance and Revenue Authorities to support the analysis of tax policies through the DFID-funded Centre for Tax Analysis in Developing Countries (TAXDEV). TAXDEV also supports a number of ongoing research projects, with initial analysis of the role of VAT rate differentiation and the impact of a simplified VAT scheme for small taxpayers in West Bengal published.