_to consumable income. Results are calculated at the $1.25 daily poverty line, 2005-PPP. A positive poverty reduction effect means that poverty is declining, while a negative means that poverty is rising._ _Box 2. Measuring_ _<u>poverty in Uganda</u>_ The poverty line was set in 1998 using 1993 data by estimating the amount of expenditure needed to satisfy the minimum daily calorie requirements and basic non-food needs. Appleton et al. (1999) identified the 28 commonly consumed food items and the corresponding amount consumed to meet 3,000 calories per adult equivalent. Calorie requirement varies by age and gender, and hence the 3,000 calories is per adult equivalence. Based on the population structure then, the average per capita calorie need was 2,283 calories.

The minimum expenditure on basic non-food needs was estimated using the classic approach of Ravallion and Bidani (1994) by identifying the non-food expenditure of households that are just on the food poverty line. The justification for using these households’ non-food expenditure as a reference is that the poor have sacrificed some of their need for calories to buy the non-food items. Therefore, these non-food expenditures should also be regarded as meeting essential needs. The non-food expenditure was allowed to vary by region and rural/urban areas in order to account for spatial differences prices (Appleton et al., 1999). It includes, among other items, rent, utility fees, as well as education and health expenditures. The poverty line is the sum of expenditure on basic food and non-food items. Since 1993, the Consumer Price Index has been used to update this poverty line.

_Source: Appleton et al (1999)._

# 4.3. Fiscal impoverishment

An individual receiving benefits and paying taxes experiences increases and decreases (respectively) in income or purchasing power. When an individual who is measured as poor at _post-fiscal_ income experienced a greater burden from revenue collection instruments (i.e. she paid more in taxes) than she received in benefits, that individual has been fiscally impoverished. When individuals who are measured as poor at _pre-fiscal_ income receive more in benefits than they pay in taxes, we count these as fiscal gains to the poor. We summarize these individual gains and losses through the Fiscal Impoverishment (FI) and Fiscal Gains to the Poor (FGP) indices (first proposed by Higgins and Lustig 2016).

Table 4 shows that as a result of all taxes and transfers (excluding transfers made in-kind), 22.8 percent of the population in Uganda was fiscally impoverished in 2016/17, almost twice as much as in 2012/13<sup>19</sup> . As discussed in the introduction, the significant increase over the 2012/13-era rates of fiscal impoverishment can be attributed to an increase in indirect taxes relative to subsidies _allocated_ between the two years. In 2012/13, indirect taxes allocated to UNHS households were only 7.8 times greater than subsidies allocated, while in 2016/17 taxes allocated were 11.3 times greater than subsidies. This is the result of both an increase in absolute terms of total revenue collections allocated, and an absolute decline in the allocation of indirect subsidies.

Fiscal impoverishment was also significant in Tanzania and Zambia at approximately 51 and 53 percent of the population (in 2011 and 2015 respectively), while Ethiopia in 2011 experienced a fiscal

> 19 Note that these numbers are calculated using the $1.25 poverty line, for the sake of comparison.

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