Poor Protection: The Role of Taxes and Social Benefits in the Developing World During Crises

Abstract

This book examines the role of social protection and taxation systems in developing countries during times of crises. The main objective of the work is to promote understanding about proper crisis response, and the way social protection and tax systems can be made more sustainable to support countries’ paths through and out of economic crises. While there is a vast body of literature evaluating social protection programmes in general, few of these focus on episodes of crisis. During the COVID-19 pandemic, the number and scale of social protection programmes increased rapidly around the globe, however many developing countries lacked a systematic approach to social protection and taxation. Crises have a devastating effect on employment, incomes, and livelihoods. These impacts are more dangerous when people are in a vulnerable position to start with. This has become very clear during the latest worldwide crises, including the sharp rise in food and fuel prices. Armoured with comprehensive policies and systems for social protection and taxation, developing countries could enable automatic and speedy assistance when crises hit across the entire income distribution. Analogous to the currently standard financial stress testing in anticipation of crises, a thorough stress testing of social protection and tax policies is also of crucial importance. The work discusses to what extent can tax–benefit systems act as automatic stabilizers in a developing country context during crises to help provide fiscal space necessary to cushion, at least the most, detrimental developments in terms of inequality, especially vulnerable households and groups facing extreme poverty.