Taxpayer response to greater progressivity Evidence from personal income tax reform in Uganda
Loading...
Date
2023-06-22
Journal Title
Journal ISSN
Volume Title
Publisher
UNU-WIDER
Abstract
We evaluate a major personal income tax reform in Uganda that came into effect in 2012–13,
contributing to the scarce literature on the effects of personal income tax reform on employees’ income in
a low-income country in Africa. The reform increased the tax-free lower threshold, increased tax rates for
higher incomes, and introduced an additional highest tax band for top 1% of income earners. Using the
universe of pay-as-you-earn (PAYE) administrative data from the Uganda Tax Authority, we analyse the
impact of the reform on reported labour incomes. In the preferred specification, we find very limited
support for behavioural reactions. However,heterogeneity analysis reveals that top-income workers in firms
handled by ordinary (as opposed to medium or large taxpayer) offices report lower incomes after the
reform. We also find suggestive evidence that part of the response may arise from income shifting. The
reform managed to raise more revenue and it also led to a limited reduction in after-tax income inequality.
Description
Keywords
Citation
Jouste, M., Barugahara, T. K., Ayo, J. O., Pirttilä, J., & Rattenhuber, P. (2023, June). Taxpayer response to greater progressivity.