Publication
This chapter is part of Development Economics and Finance in Africa: Households, Firms and Government, a book examining key challenges, emerging trends and research developments in development economics and finance across Africa. The book brings together evidence and perspectives on economic growth, structural change and inclusive development, with a focus on informing research and policymaking across the continent.
This chapter provides a comprehensive review of the literature on the distributional, poverty, and inequality impacts of taxation and public spending in Africa. It begins by outlining key methodological considerations in microsimulation modelling and fiscal incidence analysis, highlighting their application in contexts characterised by widespread informality and low tax compliance. The review finds that while personal income taxes and cash transfers are generally progressive, their redistributive potential remains constrained by narrow coverage and limited fiscal capacity. Indirect taxes tend to exhibit mild progressivity, particularly when accounting for informal consumption. Public spending – especially on education, healthcare, and social transfers – remains the primary driver of redistribution and poverty reduction. The distributional patterns of individual fiscal instruments are likely to change as African economies increasingly develop and formalise. However, higher revenues enabling greater social spending should increase the progressivity of the system as a whole. This chapter concludes by emphasising the growing use of distributional analysis in policymaking as a tool for designing equitable, evidence-based fiscal reforms.
Published on: 29th September 2026
