Publication: Modeling the Revenue and Distributional Effects of Tax Reform in Paraguay: Challenges and Lessons
Loading...
Published
2021-06
ISSN
Date
2021-08-09
Author(s)
Canavire, Gustavo
Farfan, Gabriela
Galeano, Juan Jose
Gayoso, Lyliana
Piontkivsky, Ruslan
Sacco, Flavia
Editor(s)
Abstract
In 2019, the Government of Paraguay (GOP) embarked on a comprehensive tax reform to simplify and modernize its tax system. At the request of the Ministry of Finance (MOF), and building on long-standing policy dialogue with the country, the World Bank (WB) Poverty team worked quickly to develop a micro-simulation tool to inform policymakers on the potential revenue and distributional effects of the reform as it was being developed. In this note, we summarize the context, approach, challenges, and lessons learned from constructing the Fiscal Simulation Tool and highlight the tool’s long-term value for policy dialogue and decision making.
Link to Data Set
Citation
“Canavire, Gustavo; Corral, Paul; Farfan, Gabriela; Galeano, Juan Jose; Gayoso, Lyliana; Piontkivsky, Ruslan; Sacco, Flavia. 2021. Modeling the Revenue and Distributional Effects of Tax Reform in Paraguay: Challenges and Lessons. Poverty and Equity Notes;No. 41. © World Bank. http://hdl.handle.net/10986/36084 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Understanding the Distributional Impacts of Increases in Fuel Prices on Poverty and Inequality in Paraguay(World Bank, Washington, DC, 2022-12)The recent global increases in fuel prices threaten the gains in poverty reduction that countries like Paraguay have achieved over the past few decades. Therefore, policy makers must understand the potential distributional impacts of increases in fuel prices to evaluate the implementation of alternative measures that could mitigate these impacts. This paper analyzes the potential effects of fuel prices on poverty and inequality in Paraguay. Using microsimulation methods and based on the Commitment to Equity framework, it estimates the impact of higher fuel prices on welfare, poverty, and inequality based on three scenarios: (a) increases in gasoline prices, (b) increases in diesel prices, and (c) simultaneous increases in gasoline and diesel prices. The results obtained suggest that the total impact of increasing fuel prices tends to be more regressive in Paraguay. At the same time, the results of the simulations indicate small effects on income inequality.Publication Socio-Emotional Drivers of Youth Unemployment(World Bank, Washington, DC, 2022-06)This study seeks to contribute to the existing literature in Sudan by analyzing psychological, social, and behavioral drivers of youth employment in combination with key structural issues identified in the country. Our analysis is based in existing literature on the structural problems that Sudanese youth face to accessing the labor market and uses a novel dataset to examine the factors that determine youth’s career aspirations as well as the factors that serve as barriers to achieve their career aspirations. In addition, the study explores the role of mindsets and soft skills, both as direct determinants of labor market outcomes as well as indirect determinants through their impact on aspirations. Specifically, we measure mental health (anxiety), core self-beliefs, and job-relevant soft skills that moderate the way individuals manage and interact socially in the labor market. Core self-evaluation beliefs determine the way individuals perceive their own basic capabilities, and soft skills are a set of learned, realized behaviors that allow individuals to effectively manage inter- and intrapersonal situations. The aim of this study is to provide a deeper and more comprehensive understanding of the youth unemployment challenge to help identify potential cost-effective interventions that support youth’s job search and employability in Sudan.Publication Psychological Distress One Year into the COVID-19 Pandemic(World Bank, Washington, DC, 2022-06)The outbreak of COVID-19 coincided with a period of significant economic, social, and political challenges in Sudan. The most significant of these were related to the recent establishment of a transitional government in August 2019 after the fall of the ruling regime due to the revolution that started in December 2018 and succeeded in toppling the government in April 2019. But the optimism around the political developments were accompanied by marked fluctuations in the economy that were further exacerbated by the pandemic. Between March 2020 (the first wave of the pandemic) and June 2021 (the time of this survey) inflation went from 81.64 percent to 412.75 percent, and the Sudanese pound severely depreciated. While the government introduced a package of reforms aiming at restoring macro-economic stability, soaring commodity prices and shortages of power and fuel, are some of the economic challenges that fueled social and political unrest during this period. The first COVID-19 case in Sudan was confirmed on March 13 of 2020, and soon after, cases started to increase. As in many developing countries, evidence suggests that COVID-19 exposure was significantly more prevalent than that indicated by officially reported cases. The speed of propagation of the coronavirus and the uncertainty around how to prevent it led to the implementation of different preventive and control measures in the first quarter of 2020, including restrictions on activities and the promotion of preventative health measures. 3,4 The government implemented two lockdowns aiming to restrict mobility. The first lockdown implemented from March to June 2020 was strict. Initially it only allowed activity until 10am, and it gradually extended to 1pm and eventually to 6pm. The second lockdown (September - December) was more lax. Furthermore, adherence to the timeframes set by the government was highly correlated with socio-economic status. Middle-class segments of Sudanese society were able to comply more readily than their less economically privileged counterparts. As a result, only the major thoroughfares were empty. In contrast, gatherings, public prayers, social life, and market congregations were largely maintained in neighborhoods of lower socioeconomic status.Publication The Distributional Impact of Fiscal Policy in South Africa(World Bank Group, Washington, DC, 2015-02)This paper uses the 2010/11 Income and Expenditure Survey for South Africa to analyze the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. The paper also assesses the redistributive effectiveness of fiscal interventions given the resources used. Because it applies the Commitment to Equity methodology, the results for South Africa can be compared with other middle-income countries for which the framework has also been applied. The main results are twofold. First, the burden of taxes -- namely the personal income tax, the value added tax, excises on alcohol and tobacco, and the fuel levy -- falls on the richest in South Africa and social spending results in sizable increases in the incomes of the poor. In other words, for the components examined, the tax and social spending system is overall progressive. Second, for these elements, fiscal policy in South Africa achieves appreciable reductions in income inequality and poverty. Moreover, these reductions are the largest achieved in the emerging market countries that have so far been included in the Commitment to Equity project. Although fiscal policy is equalizing and poverty-reducing, the levels of inequality and poverty that remain still rank among the highest in middle-income countries. Looking ahead, as South Africa grapples with slow economic growth, a high fiscal deficit, and a rising debt burden, addressing the twin challenges of high inequality and poverty will require not only much improved quality of public services, but also higher and more inclusive economic growth.Publication Recovering Income Distribution in the Presence of Interval-Censored Data(World Bank, Washington, DC, 2022-08)This paper proposes a method to analyze interval-censored data, using multiple imputation based on a heteroskedastic interval regression approach. The proposed model aims to obtain a synthetic data set that can be used for standard analysis, including standard linear regression, quantile regression, or poverty and inequality estimation. The paper presents two applications to show the performance of the method. First, it runs a Monte Carlo simulation to show the method's performance under the assumption of multiplicative heteroskedasticity, with and without conditional normality. Second, it uses the proposed methodology to analyze labor income data in Grenada for 2013–20, where the salary data are interval-censored according to the salary intervals prespecified in the survey questionnaire. The results obtained are consistent across both exercises.
Users also downloaded
Showing related downloaded files
Publication The Container Port Performance Index 2020 to 2024: Trends and Lessons Learned(Washington, DC: World Bank, 2025-09-22)The Container Port Performance Index (CPPI) provides a global benchmark of how container ports perform in handling vessel calls. Developed jointly by the World Bank and S&P Global Market Intelligence, it measures the time ships spend in port and relates this to the number of containers moved during that time. This approach makes the CPPI a unique diagnostic tool that can highlight patterns in port operations and shed light on global and regional supply chain dynamics. Now in its fifth edition, the CPPI report covers the period from 2020 to 2024. It builds on a well-established methodology to generate scores for more than 400 container ports worldwide. Over time, the CPPI has become a trusted reference point for policymakers, industry stakeholders, and researchers who seek to understand how ports adapt to shocks, recover from disruptions, and identify opportunities for investments, reform and modernization. A major innovation in this edition is the introduction of multi-year trend analysis. Rather than presenting annual snapshots, the report now tracks how CPPI scores have changed across five years. This longitudinal perspective reveals shifts in port performance, showing where scores have risen, fallen, or remained stable. By linking these movements to external factors, the CPPI offers insights into how global and regional supply chains evolve under pressure. The results clearly mirror the crises that have shaken global trade. During the COVID-19 pandemic, CPPI scores in different regions declined sharply as congestion, equipment shortages, and delays overwhelmed many ports. By 2023, global averages rebounded in parallel with easing freight markets and reduced congestion. Yet 2024 brought new challenges: the Red Sea crisis disrupted major trade lanes, while climate-related constraints at the Panama Canal added further stress. These shocks were reflected in lower global and several regional average scores, underscoring the vulnerability of maritime transport to geopolitical and environmental events. The CPPI is not about comparing one port against another, but about understanding changes in performance over time. Ports that improved their scores often did so by reducing time at anchor, optimizing berth operations, investing in digital tools, and strengthening coordination across logistics partners. The evidence confirms that improvements are possible across ports of all sizes, and that rising scores are linked to deliberate actions to minimize time in port relative to containers moved. By consolidating five years of results, this edition transforms the CPPI into a long-term reference point. It shows how global crises have affected shipping, how different regions have adapted, and what lessons can be drawn for future resilience. The World Bank and S&P Global Market Intelligence remain committed to maintaining the CPPI as a global public good, providing transparency, comparability, and practical insights to support more reliable and sustainable maritime supply chains.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication The Container Port Performance Index 2023(Washington, DC: World Bank, 2024-07-18)The Container Port Performance Index (CPPI) measures the time container ships spend in port, making it an important point of reference for stakeholders in the global economy. These stakeholders include port authorities and operators, national governments, supranational organizations, development agencies, and other public and private players in trade and logistics. The index highlights where vessel time in container ports could be improved. Streamlining these processes would benefit all parties involved, including shipping lines, national governments, and consumers. This fourth edition of the CPPI relies on data from 405 container ports with at least 24 container ship port calls in the calendar year 2023. As in earlier editions of the CPPI, the ranking employs two different methodological approaches: an administrative (technical) approach and a statistical approach (using matrix factorization). Combining these two approaches ensures that the overall ranking of container ports reflects actual port performance as closely as possible while also being statistically robust. The CPPI methodology assesses the sequential steps of a container ship port call. ‘Total port hours’ refers to the total time elapsed from the moment a ship arrives at the port until the vessel leaves the berth after completing its cargo operations. The CPPI uses time as an indicator because time is very important to shipping lines, ports, and the entire logistics chain. However, time, as captured by the CPPI, is not the only way to measure port efficiency, so it does not tell the entire story of a port’s performance. Factors that can influence the time vessels spend in ports can be location-specific and under the port’s control (endogenous) or external and beyond the control of the port (exogenous). The CPPI measures time spent in container ports, strictly based on quantitative data only, which do not reveal the underlying factors or root causes of extended port times. A detailed port-specific diagnostic would be required to assess the contribution of underlying factors to the time a vessel spends in port. A very low ranking or a significant change in ranking may warrant special attention, for which the World Bank generally recommends a detailed diagnostic.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.