Impact of Universal Old Age Benefit to Revenue and Poverty Reduction in Tanzania

Authors

DOI:

https://doi.org/10.51867/ajernet.4.2.12

Keywords:

Microsimulation, Old Age Poverty, Social Benefit, Tax-Benefit Reforms

Abstract

This manuscript analyzes the impact of old age benefit policy reforms on government revenue, income sharing, and poverty in Tanzania. This is an instrument for strengthening social protection. In this context, a universal old-age pension might assist Tanzania's Mainland in reducing income inequality in a similar manner to the positive outcome identified among developed countries in the European Union. This study uses a static microsimulation model for Tanzania (TAZMOD v2.4). The simulation model is based on social benefit reforms resulting from changes in the old age benefit policy. The two reforms were proposed. The findings found that in both proposed reforms, there is an increase in Government returns over taxes; Social Security Contribution (SSC) and indirect taxes increase by 5.31 percent from TSH 8,870,422.74 to TSH 9,368,616.08, respectively. Also, the share of the poor population decreased by 0.55%. Regarding the effect on poverty, it decreases by 0.55 percent in the two proposed reforms. The empirical results of the presented quantitative analyses have concrete policy implications: It can be concluded that there is an urgent need to reform the targeting of social pensions as the majority of the elderly and poor continue to be excluded from the benefits. The Government can introduce the old age benefit to people 60 years of age and older; hence, the outcomes are significant, and their space depends unfavorably on whether the profit sum is allocated. The government could improve old age benefits to address the issue of poverty and later improve old-age livelihoods.

References

Alonso-García, J., & Rosado-Cebrian, B. (2021). The financial crisis and pension reform in Spain: The effect of labour market dynamics. J. Econ.Policy Reform 2021, 24, 201-218. https://doi.org/10.1080/17487870.2019.1599718 DOI: https://doi.org/10.1080/17487870.2019.1599718

Decoster, A., Pirttilä, J., Sutherland, S., & Wright, G. (2019). 'SOUTHMOD: Modelling Tax-Benefit Systems in Developing Countries'. International Journal of Microsimulation, 12(1), 1-12. https://doi.org/10.34196/ijm.00192. DOI: https://doi.org/10.34196/ijm.00192

Dietrich, S., Malerba, D., Barrientos, A., Gassmann, F., Mohnen, P., Tirivayi, N., & Matovu, F. (2017). "Social Protection Investments, Human Capital, and Income Growth: Simulating the Returns to Social Cash Transfers in Uganda." UNU-MERIT Working Paper 2017/029. Limburg: UNU-MERIT.

Ebbinghaus, B. (2011). The varieties of pension governance. In Pension Privatization in Europe. Oxford, UK: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199586028.001.0001 DOI: https://doi.org/10.1093/acprof:oso/9780199586028.001.0001

Gasior, K., Leventi, C., Noble, M., Wright, G., & Barnes, H. (2021). The distributional impact of tax and benefit systems in five African countries. International Journal of Sociology and Social Policy, 42 (1/2), 92-105. https://doi.org/10.1108/IJSSP-01-2021-0008 DOI: https://doi.org/10.1108/IJSSP-01-2021-0008

Haushofer, J., & Shapiro, J. (2013). Household response to income changes: Evidence from an International Labour Organization (ILO) (2014). World Social Protection Report 2014-2015: Building Economic Recovery, Inclusive Development and Social Justice. Geneva: International Labour Office.

Help Age. (2021). A social pension in Rwanda? Help Age. https://www.helpage.org/blog/a-social-pension-in-rwanda/.

Help Age. (2022). Help Age Policy Brief: Action needed for Tanzania's older people in crisis. Help Age. https://www.helpage.org/news/the-food-fuel-finance-crisis-tanzania-under-the-spotlight/

ILO. (2017). World Social Protection Report: Universal Social Protection to Achieve the Sustainable Development Goal. Geneva: International Labour Office, Social Security Department.

ILO. (2018). "Social Protection for Older Persons: Policy Trends and Statistics 2017-19." Social Protection Policy Papers, Paper 17. Geneva: International Labour Office, Social Protection Department.

Jouste, M., & Rattenhuber, R. (2018). "Simulating universal pensions in Ecuador, Ghana, Tanzania, and South Africa." WIDER Working Paper 2018/23. https://doi.org/10.35188/UNU-WIDER/2018/465-0 DOI: https://doi.org/10.35188/UNU-WIDER/2018/465-0

Mesa-Lago C. (2012). Reassembling social security: a survey of pensions and health care reforms in Latin America. Oxford University Press. https://doi.org/10.1093/acprof:osobl/9780199644612.001.0001 DOI: https://doi.org/10.1093/acprof:osobl/9780199644612.001.0001

Mwasiaji, W., Reidel, K., Mistiaen, E. S., Sandford, J., & Munavu, M. M. (2016). Inua Jamii: towards a more effective national safety net for Kenya. Washington D.C.: World Bank Group.

NBS. (2014). Tanzania Household Budget Survey: Main Report 2011/12. Dar es Salaam: Tanzania National Bureau of Statistics (NBS).

NBS. (2018). Ministry of Finance and Planning and Office of the Chief Government Statistician (2018). 'National Population Projections. Dar es Salaam: National Bureau of Statistics, Ministry of Finance and Planning and Office of the Chief Government Statistician.

NBS. (2019). Household Budget Survey 2017-18: Key Indicators Report. Dodoma: Tanzania National Bureau of Statistics (NBS).

Sharma, M. (2023). Poverty and Gender: Determinants of Female- and Male-Headed Households with Children in Poverty in the USA, 2019. Sustainability, 15(9), 7602; https://doi.org/10.3390/su15097602. DOI: https://doi.org/10.3390/su15097602

https://doi.org/10.3390/su15097602

United Nations, Department of Economic and Social Affairs, Population Division (2013). World Population Ageing 2013. United Nations. ST/ESA/SER.A/348. ST/SEA/SER.A/348.

Weaver, R. K. (1998). The politics of pensions: Lessons from abroad. In Framing the Social Security Debate. Washington, DC, USA: National Academy of Social Insurance.

Whiteford, P., & Whitehouse, E. (2006). Pension Challenges and Pension Reforms in OECD Countries. Oxford Review of Economic Policy, 22 (1), 78-94. https://doi.org/10.1093/oxrep/grj006 DOI: https://doi.org/10.1093/oxrep/grj006

Wolf, I., & Del Rio, L.C.Y. (2021). The Expectation for Pension Insurance in Funded Schemes: Theoretical Model and Global Implementation. Acad. J. Interdiscip. Stud., 2021(10), 161. https://doi.org/10.36941/ajis-2021-0131 DOI: https://doi.org/10.36941/ajis-2021-0131

Wright, G., Leyaro, V., Kisanga, E., & Byaruhanga, C. (2019). Policy Transparency in the Public Sector: The Case of Social Benefits in Tanzania. International Journal of Microsimuation, 12(1), 83-104. https://doi.org/10.34196/ijm.00195 DOI: https://doi.org/10.34196/ijm.00195

Downloads

Published

2023-08-05

How to Cite

Mmasa, J. J. (2023). Impact of Universal Old Age Benefit to Revenue and Poverty Reduction in Tanzania. African Journal of Empirical Research, 4(2), 68–75. https://doi.org/10.51867/ajernet.4.2.12