A transfer is considered to be _pro-poor_ when the transfers received, measured as a share or fraction of pretransfer income, decline with income. Notice that this definition of pro-poor includes cases in which the absolute transfer level declines with income. For example, if a transfer is targeted to poor households, and non-poor households do not receive the transfer, then, algebraically, transfers received are declining in income level. Because taxes always reduce purchasing power, we do not label taxes “pro-poor,” although when taxes paid (measured as a share of pretax income) increase with income levels, they are by definition progressive. In everyday usage, for example, a marginal income tax rate schedule that has increasing marginal rates by taxable income bracket will be considered a “progressive” income tax.

Two indicators we use to understand how a fiscal policy element is progressive or regressive are the _concentration shares_ and the _incidence_ of a fiscal policy. Concentration shares show the share of the value of fiscal policy captured by (or imposed on) a subset of the population such as the poorest 10 percent of individuals or the richest 10 percent of individuals. For example, if the richest 10 percent of Egyptians pay 75 percent of the total personal income taxes collected in a given year, then the richest decile’s concentration share of personal income taxes is 75 percent (and that, in turn, implies that the other 90 percent of Egyptians pay _no more than_ 25 percent of total personal income tax revenues). The incidence of a fiscal policy element calculates the value of a benefit captured (or a tax imposed) _relative_ to the value of income _before_ the benefit was received or before the tax was imposed.

While a pro-poor transfer is always progressive, the reverse is not necessarily true. Likewise, in a fiscal system with more than one element, a pro-poor or progressive transfer (or a progressive tax) is not necessarily inequality reducing. This study incorporates every type of fiscal policy element listed in Figure 7 using consumption expenditure recorded in HIECS as the measure of _primary_ income. The team assumes that total consumption expenditures––including the value of imputed rent for those living in owner-occupied housing as well as the implied value of any auto-production/auto-consumption––are equal to the CEQ disposable income concept (approximately in the middle of the flowchart in Figure 7). The team then works “backward” and “forward” from disposable income to other CEQ income concepts to arrive at pre- and postfiscal measures.<sup>21</sup> Egypt’s prefiscal income measure includes income received from the public pension system. Market income reflects income before any transfers (including public spending on health and education, fuel and energy subsidies, and unconditional cash transfers) or taxes (including personal income taxes and GST) have been added. In treating contributory pensions, the CEQ methodology treats pension contributions and pension income received as deferred income. Egypt’s contributory pension system functions much as a nonwage salary payment; therefore, the team’s prefiscal income measure becomes Market Income + Pensions (top box in Figure 7).<sup>22</sup>

> 21 Consumption expenditure is the team’s primary income measure. Moreover, all other income concepts. including market income. are derived from consumption expenditure. For these reasons, the team does not create a _taxable income_ concept. Other CEQ assessments do produce this income concept when relevant. Creating a taxable income concept requires knowledge of the composition of market income. An Egyptian household’s expenditure profile in the HIECS cannot provide any information on the composition of its income. For the same reason, the team is unable to say anything about the savings or current asset profiles of HIECS households: a current consumption expenditure profile provides no information on either investment spending or on the returns accruing to any household assets.

22 While a CEQ Assessment typically includes an alternative scenario where public contributory pensions are treated as a government transfer (rather than deferred income), information regarding total pension payouts (in 20