世界銀行-島上的財政發(fā)病率：格林納達的財政制度及其發(fā)病率 （英）-2024.1

Policy

Research

Working

Paper10678Fiscal

Incidence

on

t

he

IslandGrenad

a’s

Fiscal

System

and

Its

I

ncid

enceGustavoCanavire-BacarrezaGuillermoGómezAliagaChevanneBrittonFernandoRios-AvilaWilsonJimenezPozoSilviaGranados

IbarraRanLiPov

ert

yand

Equity

Global

Practice&M

acroeconom

ics,

Trad

e

and

Investment

Global

PracticeJanu

ary

2024Policy

Research

Working

Paper

10678Abstractis

paper

examines

the

distributional

e?ects

of

?scalp

olicy

in

Grenad

a.

Using

data

f

rom

the

2017–18

LivingConditions

and

H

ou

sehold

Budgets

Survey

and

f

ollow

-ing

the

Commitment

toEquity

analy

sis

fram

ework,

thepaper

estimates

the

e?ects

of

?scalp

olicy

interventionson

inequality

and

p

overty.

It

analy

zes

the

distributionalincidence

of

d

irect

and

ind

irect

taxes,

d

irect

t

ransf

ers

p

ro-videdby

social

t

ransf

ers

and

school

feeding

p

rograms,

andin-kind

transfers

generatedby

p

ublic

services

in

health

andeducation.

eresu

lt

s

show

that

Grenad

a

hasa

tax

systemthat

is

neutral

on

the

value-added

tax

side

and

p

rogressiveon

the

p

ersonal

income

tax

side.

Fu

rt

herm

ore,

d

irect

t

rans-f

ers

make

a

modest

contribution

to

p

overty

reduction

andare

alm

ost

neutral

in

their

distributive

imp

act.

e

resu

lt

scontribute

to

the

understanding

of

who

bears

the

burden

oftaxation

and

bene?ts

f

rom

t

ransf

ers

and

of

how

Grenad

a’s?scalsystem

can

imp

rove

its

redistributive

e?ect.is

paper

is

a

p

roduct

of

the

Pov

ert

y

and

Equity

Global

Practice

and

the

Macroeconomics,

Trad

e

and

Investment

GlobalPractice.

It

is

p

art

of

alarger

e?ort

by

the

World

Bank

to

p

rovide

op

en

access

to

its

research

and

make

acontributiontodevelop

ment

p

olicy

discussions

arou

nd

the

w

orld

.

Poli

cy

Research

Working

Pap

ers

a

re

also

p

osted

on

the

Web

athttp

:///p

rwp

.

e

au

t

hors

may

be

contacted

at

gcanav

ire@

w

orld

b

ank.

org;

ranli@

w

orld

b

ank.

org;C

hevanne.britton@

gm

;

f

riosa@

gm

;

wjimenezp

ozo@;

sgranad

osib

arra@

w

orld

b

ank.

org;

andggom

ez

aliaga@

w

orld

b

ank.

org.e

Policy

Research

Working

Paper

Series

disseminates

the

?ndings

of

work

in

progress

to

encourage

the

exchange

of

ideas

about

developmentissues.

An

objective

of

the

series

is

to

get

the

?ndings

out

quickly,

even

if

the

presentations

are

less

than

fully

polished.

e

papers

carry

thenames

of

the

authors

and

should

be

cited

accordingly.

e

?ndings,

interpretations,

and

conclusions

expressed

in

this

paper

are

entirely

thoseoftheauthors.eydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsa?liatedorganizations,orthoseoftheExecutiveDirectorsofthe

World

Bankorthegovernmentstheyrepresent.ProducedbytheResearchSupport

TeamFiscalIncidence

ontheIsland:

Grenada’sFiscalSystemandItsIncidence*Gustavo

Canavire-Bacarreza?GuillermoGómezAliaga?ChevanneBritton§FernandoRios-Avila**Wilson

JimenezPozo??SilviaGranadosIbarra??RanLi§§Keywords:Fiscalincidence,

Poverty,Inequality,Taxes,SocialTransfers,PublicExpenditure,Public

RevenueJELCODES:D31,H11,

H22,H5,I14,I24,I3,O54*

The

findings,

interpretations,

and

conclusions

expressed

in

this

paper

do

not

necessarily

reflect

the

views

of

the

WorldBank,

the

Executive

Directors

of

the

World

Bank

or

the

governments

they

represent.

The

World

Bank

does

notguarantee

theaccuracy

of

thedata

included

in

this

work.

The

authors

would

liketo

thank

CarlosRodríguez-Castelan,GabrielaInchauste,

CesarCanchoand

GabrielLarafor

helpfulcommentsandsuggestions.?

TheWorldBank,PovertyandEquityGlobalPractice;gcanavire@.?

TheWorldBank,PovertyandEquity

GlobalPractice;ggomezaliaga@.§

Grenada’sMinistryofFinance;chevanne.britton@.**

LevyInstituteatBard

College;f.rios.a@.??

FundacionAru;

wjimenezpozo@.??

TheWorldBank,PovertyandEquityGlobalPractice;

sgranadosibarra@.§§

TheWorldBank,MacroeconomicandTradeGlobalPractice;ranli@.1.

IntroductionBecauseof

theiridiosyncraticeconomiccharacteristics,smallislanddevelopingstates(SIDS)face

greater

challenges

that

elevate

the

costs

associated

with

delivering

public

services,including

education,

health,

and

social

programs.

The

direct

impacts

of

these

challenges

haverepercussions

on

public

finances,

pushing

governments

to

assess

and

prioritize

sectors

indetermining

where

to

focus

their

investments

(OECD

2018).

This

problem

is

aggravated

bythe

vulnerability

of

SIDSto

shocks

that

limit

their

domestic

revenue

generation,

largely

due

totheir

dependence

on

tourism

activities

(OECD

2018).

In

this

context,

a

fiscal

incidence

analysisbecomesofprimeimportance,

asLustig(2020)pointsout.This

paper

focuses

on

Grenada,

an

SIDS

with

a

population

of

around

113,000,

that

is

highlydependent

on

tourism.

As

a

result,

the

country

is

vulnerable

to

climatic

shocks

and

economicdownturns

in

developed

countries.

Grenada

is

at

high

risk

for

climate-related

disasters,

rankingthird

globally

in

terms

of

GDP

vulnerability

and

seventh

in

terms

of

fatalities

per

100,000inhabitantsduetoweather-relatedlosses.Approximatelyone-fifthofthecountry’spopulationlives

below

the

national

poverty

line

(OECD

2018;

World

Bank

2021;

Grenada,

Ministry

ofForeign

Affairs

2022).

The

COVID-19

pandemic

severely

impacted

Grenada’s

economy,particularly

its

tourism

sector,

leading

to

a

significant

economic

contraction

and

increasedunemployment.1

The

government’s

response

measures

contained

the

initial

spread

of

the

virus,but

subsequent

waves

caused

further

economic

challenges.

Despite

some

recovery

in

2021,Grenada’s

GDP

remains

below

pre-pandemic

levels,

and

the

government

had

to

suspend

thefiscal

rule

for

three

consecutive

years

to

address

the

pandemic’s

extended

impacts.2

Theextended

impacts

of

the

pandemic

have

made

additional

fiscal

stimulus

necessary

(seeAppendixA)tosupport

vulnerablegroups

andmaintaineconomicactivities.The

paper

examines

the

redistributive

impact

of

taxes

and

public

spending,

following

theCommitment

to

Equity

(CEQ)

framework

(Lustig

2018).

The

framework

aims

to

provide

acomprehensivepictureof

theredistributiveeffects

offiscal

policies

on

household

incomeandconsumption.

Here

the

CEQ

framework

is

used

to

assess

Grenada’s

fiscal

policies,

focusing

onpre

and

post

fiscal

incomes

in

order

to

determine

the

net

beneficiaries

and

payers

of

thesepolicies

(Lustig

2020).

For

the

Grenada

context,

a

fiscal

incidence

analysis

through

the

CEQframework

is

relevant,

because

it

can

provide

evidence

concerning

the

extent

to

which

thegovernment’s

fiscal

policies

are

impacting

the

welfare

of

the

country’shouseholds

and

informfuturepolicydecisions.This

paper

makes

multiple

contributions

to

the

existing

literature.

First,

we

assess

the

fiscalsystem

of

an

SIDS,

Grenada,

which

faces

resource

constraints,

natural

hazards,

and

a

highpoverty

rate.

These

characteristics

make

it

important

to

determine

whether

the

country’sfiscalsystem

has

a

redistributive

impact.

Furthermore,

Grenada

is

located

in

a

region

where

fiscalincidence

is

understudied.

Previous

work

on

Caribbean

islands

using

the

CEQ

methodologyhas

focused

on

bigger

and

more

developed

islands

such

as

Jamaica

(Katayama

et

al.

2021),1Before

the

COVID-19pandemic,Grenadawas

making

a

strong

commitment

to

economic

reformand

resiliencebuilding

with

the

support

of

international

organizations.

It

achieved

an

average

annual

growth

of

4.5

percentbetween

2014

and

2019,

surpassing

the

regional

average.

Fiscal

reforms,

including

the

Fiscal

Responsible

Act(FRA)

of

2015,

led

to

a

significant

reduction

in

public

debt

and

the

accumulation

of

a

fiscal

surplus.

Nevertheless,Grenada’seconomyremainslessdiversifiedandhighlysusceptibletoclimatechangeand

naturaldisasters.2MFMODDatabase,theWorldBank’sWorldDevelopment

Indicators(WDI),and

GEMdatabases,IMF.Mostsourcesavailablein/.2Barbados

(García-Pe?a

Bersh

2019),

and

the

Dominican

Republic

(Aristy-Escuder

et

al.

2016).Second,

we

provide

a

comparison

with

similar

countries

in

the

Caribbean

in

order

to

understandthe

differences

between

a

small

developing

island

and

larger

counterparts.

Finally,

weincorporate

into

the

analysis

fiscal

interventions

that

have

not

been

previously

analyzed,

suchas

the

personal

income

tax

(PIT),

which

was

readjusted

in

2019;

the

most

important

directtransfer

to

poor

and

vulnerable

households,

the

Support

for

Education,

Empowerment

andDevelopmentProgramme(SEED);andschooltransfers.The

results

indicate

that

Grenada’s

fiscal

system

has

the

potential

to

decrease

poverty

rates

andinequality

in

the

country,

but

it

shows

neutral

incidence.

Grenada’s

fiscal

policy

design

isindeed

oriented

toward

the

low-income

population.

Focusing

only

on

inequality

and

accountingfor

all

fiscal

interventions

does

decrease

inequality,

as

observed

in

countries

like

Jamaica

andthe

Dominican

Republic.

These

results

point

to

the

redistributive

potential

of

fiscal

policiespursued

by

the

government

of

Grenada.

As

expected,

higher

segments

of

the

incomedistribution

pay

more

taxes

than

the

low-income

population,

and

furthermore,

the

middle-income

population

pays

more

than

they

receive,

as

does

the

population

making

up

the

high

partof

the

income

distribution.

However,

overall

indirect

taxes

tend

to

be

neutral,

meaning

theyaffect

household

income

proportionally

across

the

income

distribution;

these

taxes

do

lowerinequality,

but

also

increase

poverty

rates.

While

direct

taxes

(PIT)

do

not

have

an

effect

onpoverty,

they

help

to

reduce

inequality

in

Grenada,

indicating

a

well-targeted

structure.

In

sum,indirecttaxesareneutral,

anddirecttaxesarealmostprogressive.In

the

case

of

direct

transfers,

their

effect

on

reducing

poverty

is

higher

than

their

impact

oninequality.

However,

SEED

reduces

headcount

poverty

byalmost

three

percent,

signaling

thatthe

policy

is

well

targeted,

but

it

has

a

low

redistributive

effect,

even

though

low-incomehouseholds

receive

a

higher

amount,

indicating

this

program

is

relatively

regressive.

In-kindtransfers

show

mixed

results:

government

funding

of

education

benefits

the

poor,

with

primaryand

secondary

education

benefiting

low-

and

middle-income

households,

while

governmentfundingoftertiaryeducationbenefitsthehigherechelonsoftheincomedistribution.Healthisclearly

regressive,

providing

agreater

benefit

topoorer

households.

However,

theirimpact

onmonetary

poverty

is

challenging

to

describe

due

to

the

need

to

monetize

these

services

toestimatetheireffect.Following

this

introduction,

section

2

provides

the

context

of

Grenada’s

economic

performanceand

poverty

and

inequality

situation,

as

well

as

an

overview

of

fiscal

revenues

andexpenditures.

The

fiscal

incidence

methodology

is

described

in

section

3,

while

section

4presentsthemainresults.Section5concludesthepaper.2.

Grenada’sContext:Growth,Poverty,andFiscalPerformanceGrenada’s

economic

growth

is

heavily

affected

by

external

factors,

though

structural

reformscontributed

to

the

country’s

sustained

positive

growth

between

2014

and

2019

(figure

13,Appendix

A1).

Thanks

to

growth-enhancing

reforms

that

expanded

tourism

and

a

benignglobal

economic

environment,

real

output

growth

averaged

4.5

percent

annually

between

2014and

2019.

The

high

growth

rate

led

to

a

dramatic

increase

in

Grenada’s

per

capita

GDP.

By2019,

Grenada’s

GDP

per

capita

was

only

surpassed

by

those

of

St.

Kitts

and

Nevis

andAntiguaand

Barbuda(figure14,

Appendix

A1).

However,

thepandemic,

compounded

by

thewar

in

Ukraine,

ended

the

trend

of

solid

growth

and

led

to

a

sharp

economic

contraction

of13.8

percentin

2020,

followed

by

a

slow

recoveryin

2021–22.

The

economic

volatility

drivenbyexternalfactorsreflectstheintrinsicvulnerabilitiesofGrenadaasanSIDS.3In

line

with

the

macroeconomic

behavior,

moderate

poverty

decreased

from

2008

to

2018.However,

in

the

same

period

extreme

poverty

increased

slightly.

As

of

2018,

Grenada’spoverty

rate

had

decreased

by

almost

13

percentage

points

compared

to

2008

(the

previousyear

for

which

data

were

available).

In

contrast,

extreme

poverty

in

Grenada

increased

by

1.2percentage

points

(figure

1,

panel

a).

Regarding

inequality,

we

observe

that

during

this

10-yearperiod,

the

Gini

coefficient,

which

measures

the

inequality

of

the

income

distribution,increased

from

0.37

to

0.40

(figure

1,

panel

b).

This

increase

in

inequality

from

2008

to

2018may

imply

some

degree

of

deterioration

of

conditions

for

the

lower

part

of

the

consumptiondistribution,

which

is

also

shown

in

the

increase

of

the

extreme

poverty

rate

during

this

period.Figure1PovertyandInequalityMeasures(a)

PovertyandIndigence(%)(b)

GiniIndex37.70.4532.10.4024.80.3712.93.62.4199820082018Totalpoverty19982008Gini2018ExtremepovertySources:GovernmentofGrenada,CentralStatisticalOffice,

SurveyofLivingConditionsandHouseholdBudgetSurvey(SLCHBS)1998,2007–08,and2018–19.Grenada’s

fiscal

position

has

varied

over

the

years,

partly

due

to

natural

and

external

shocks.Following

a

modest

performance

in

2009–13,

revenues

and

grant

collection

shifted

to

anupward

trajectory

in

2014,

growing

by

an

average

of

11.2

percent

annually

until

2019.

Taxesaccounted

for

83.2

percent

of

total

government

revenue

between

2009

and

2021

(figure

2).

Taxrevenue

comprises

direct

and

indirect

taxes

levied

on

individuals

and

businesses.

The

directtaxes

are

taxes

on

income

and

profits

and

on

property,

while

taxes

on

domestic

goods

andservices

and

on

international

trade

and

transactions

comprise

the

indirect

taxes.

For

thepurposes

ofthis

paper,

wefocus

on

thePIT

under

direct

taxes

and

thevalue-added

tax

(VAT)and

excise

tax

under

indirect

taxes,

because

these

have

the

most

significant

impact

onindividuals

and

households

while

also

being

crucial

income

earners

for

the

government,

asshown

in

figure

3.

PIT

in2021

accounted

for

53.4percentof

Taxes

onIncome

and

Profits

and10.2

percent

of

tax

revenue.

The

VAT

accounted

for

83.8

percent

of

Taxes

on

Domestic

Goodsand

Services

and

35.0

percent

of

total

tax

revenue

in

2021.

Because

the

VAT

is

charged

toconsumers

at

the

point

of

purchase,

it

has

implications

for

individual

and

householdconsumption.

The

excise

tax

is

charged

ata

fixed

rate

per

quantity

of

specific

goods

(importedand

locally

manufactured

goods)

referred

to

as

“excisable

goods”

and

accounted

for

2.8

percentoftaxrevenuein2021.4Figure2RevenueandGrantsCollectionSource:EasternCaribbeanCentralBankStatistics.3Figure3TaxRevenuebyTaxTypeSource:EasternCaribbeanCentralBankStatistics.4Turning

to

governmentexpenditures,

on

average,

from

2017

to

2021,

32

percent

was

allocatedannually

to

social

programs,

including

education,

health,

and

public

assistance

transfers

(figure15,

Appendix

A2).5

The

most

important

direct

transfer

to

poor

and

vulnerable

households

isdone

through

SEED,

which

is

administered

through

the

Ministry

of

Social

Development.

Alsoimportant

is

the

School

Feeding

Programme,

which

focuses

on

providing

meals

to

needystudents.Expenditures

in

education

increased

over

the

period

2017–21

and

accounted

for

roughly

10percent

of

annual

government

expenditures

(figure

16,

Appendix

A3).

Government

recurrentexpenditure

in

public

education

generally

is

provided

in

four

stages:

pre-primary,

primary,secondary,

and

tertiary

(including

vocational

training).

Several

institutions

also

provide

specialeducation

to

serve

students

with

disabilities

and

special

needs.

The

government

largelysubsidizes

education

up

to

the

secondary

level

(including

special

education).

The

level

ofsubsidization

decreases

at

the

tertiary

level,

with

higher

fees

required

to

access

training

leading3Availablein/statistics.4Availablein/statistics.5

Thisisbasedondata

retrievedfrom

theAnnualNationalBudgetand

excludesdebtrepayments(bothprincipalandinterest).In

2022,theGrenadagovernmentinstitutedacapon

gasolineprices,whichconstitutedanenergysubsidy.Thismeasurewillbe

analyzedina

futureiteration

of

thetool.5to

associate

degrees

and

certifications

from

the

institutions

providing

this

level

of

schooling.Government

expenditure

in

public

education

is

considered

an

in-kind

transfer

because

theservicecanbeaccessedby

allschool-agechildren

regardlessofsocioeconomicbackground.Expenditures

on

health

also

increased

in

the

period

2017–21,

accounting

for

7

percent

of

annualgovernment

expenditure

as

of

2018

(figure

16,

Appendix

A3).

Inthis

paper,funds

spent

by

thegovernment

in

the

health

sector

amount

to

in-kind

transfers

to

the

public

because

these

servicesare

availabletoall.Citizens,residents,

andvisitorscan

freelyaccessthe

servicesinthepublichealth

system

with

no

differentiation

in

fees6

according

to

income

level

or

socioeconomic

class.In

addition

to

the

in-kind

transfers

in

education

and

health,

the

government

implemented

asocial

protection

system

within

the

SEED

program.

The

program

targeted

school-age

children,people

with

disabilities,

the

elderly,

the

chronically

ill,

pregnant

women,

lactating

mothers,

andthe

adult

poor.

Beneficiaries

are

selected

via

proxy

means

testing,

which

uses

householdcharacteristics

such

as

age,

household

size,

marital

status,

assets,

disability,

and

housingconditions

as

indicators

or

“proxies”

to

determine

household

expenditure

or

consumption.

Cashis

transferred

to

households:

in

2017,

it

was

EC$300

per

month

or

EC$3,600

per

annum.

In2018,

the

amount

given

to

elderly

households

was

increased

by

EC$100

per

month,

and

in2022,

the

government

raised

the

amount

paid

to

all

beneficiaries

by

EC$150

per

month.Government

annual

expenditure

on

SEED

increased

from

EC$14

million

in

2017

toapproximately

EC$18

million

in

2021

and

is

expectedto

have

increasedfurther

in

2022.

From2017

to

2021,

the

government

spent

an

average

of

EC$2.9

million

per

year

on

the

schoolfeedingprogram.3.

DataSourcesThe

primary

data

source

is

the

Survey

of

Living

Conditions

and

Household

Budgets

(SLCHBS)conducted

by

the

Central

Statistical

Office

(CSO),

the

country’s

national

statistics

office,between

April

and

May

of

2018–19.

This

survey

encompassed

a

sample

of

approximately1,689

households.

The

primary

objective

of

this

questionnaire

was

to

collect

informationrelated

to

household

socioeconomic

and

living

conditions

as

well

as

the

household

budget

inorder

to

construct

the

consumption

variable

(as

the

survey

did

not

collect

income

information),data

that

are

crucial

for

measuring

poverty

in

Grenada.

It

should

be

noted

that

this

survey

didnot

gather

information

regarding

pensions

received

or

any

social

security

contributions,

neitherby

individuals

nor

the

government.

The

survey

comprised

two

distinct

parts,

one

focusing

onhousehold

conditions

and

another

for

obtaining

individual

characteristics

of

each

householdmember.

The

person

interviewed

was

one

adult

member

(older

than

18

years

old),

though

thesurveycollectedinformationoneverysinglehouseholdmember.7The

use

of

administrative

data

on

taxable

wages

for

the

PIT

complements

the

surveyinformation.

The

source

of

this

data

set

was

the

Inland

Revenue

Division

(IRD),

a

divisionwithin

Grenada's

Ministry

of

Finance

(MOF).

This

data

set

covers

wages

for

differentworkersand

is

disaggregated

into

two

parts:

the

estimation

of

the

share

of

the

wage

allocated

for

pensionfunds,

and

the

other

being

the

gross

income,

which

is

the

taxable

part

of

the

wage

received.6

Feesarewaivedforsomeservicesprovidedtochildren,theelderly,and

theindigent.Allfeesandco-paymentswerenotincludedintheanalysisgiventhelowamountsreported

inthe

SLCHBSof2017–18.7Toevaluatethe

accuracyof

thedataforfiscalinterventions,amacroeconomic

validationispresentedinAppendixB3.6We

utilize

this

administrative

database

for

two

years,

2017

with

7,442

observations

and

for2018with8,146.Because

income

information

is

not

available

in

the

survey,

we

compare

the

administrative

data,specifically

the

taxable

portion,

with

the

consumption

estimation.

This

allows

us

to

obtain

amore

comprehensive

understanding

of

the

income

distribution.

Insome

cases,

we

complementmissing

survey

information

with

administrative

data.

Because

this

data

setis

disaggregatedbygender

and

occupational

category,

both

with

values

for

thetaxableincome,

theadministrativedata

prove

useful.

Additionally,

the

administrative

data

enable

us

to

compare

the

incomedistribution

to

ensure

data

consistency

and

improve

the

exercise's

macroeconomic

validation.The

result

is

an

accurate

set

of

information

that

makes

constructing

the

taxable

incomedistributionpossible.4.

MethodologyThis

paper

uses

the

Commitment

to

Equity

(CEQ)

methodology

to

assess

the

distributionalimpact

ofthefiscal

system

inGrenada.

According

toLustig(2018),

“TheCEQAssessment

isa

diagnostic

tool

that

uses

fiscal

incidence

analysis

to

determine

the

extent

to

which

fiscalpolicy

reduces

inequality

and

poverty

in

a

particular

country”

(62).

Fiscal

redistribution

effectsrefer

to

the

process

by

which

a

state

collects

revenue

from

individuals

and

households

(throughtaxation)

and

allocates

this

revenue

to

finance

direct

transfers,

subsidies,

and

in-kind

benefitsindividuals

and

households

enjoy

(Lustig

and

Higgins

2018).

Because

this

study

focuses

onthe

distributional

effects

on

the

population,

state

interventions

that

affect

firms

or

other

private-sector

institutions

are

excluded

from

the

methodology.

The

CEQ

framework

aims

to

answerfour

main

questions:

(1)

How

much

income

redistribution

and

poverty

reduction

is

beingaccomplished

through

fiscal

policy?

(2)

How

equalizing

and

pro-poor

are

specific

taxes

andgovern