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Item Restricted Petroleum prices, the value-added tax, and the welfare of poor households in the Philippines(2006-03) Ngwe, Donald K.Who is more burdened by rising petroleum prices and higher tax rates, the poor or the rich? The answer has several implications for social safety nets and' tax policy. This study first examines the relationship between fluctuations in petroleum prices and the welfare of households from different income classes. It then analyzes the dynamic between petroleum prices and household budgets. Income and expenditure data on the Philippines' 16 regions, collected during seven household surveys from 1985 to 2003, are used in a fixed effects model to generate the petroleum price elasticities of total household expenditures for each income class. Further, an augmented model is used to calculate the petroleum price elasticities of six commodity groups in the household budget. Finally, the paper simulates the impact of three different scenarios involving higher VAT rates and petroleum prices on the expenditure profiles of different income households. The study finds that petroleum price hikes adversely impact the poor more than the rich. Further, the inclusion of petroleum products in the R-VAT disproportionately hurts poor households.