# **Integrated Residential Development Program (RDP)**

This program is based on the development of integrated housing projects. It provides for the acquisition of land, servicing of stands for a variety of land uses including commercial, recreational, schools and clinics, as well as residential stands for low, middle and high income groups. The land use and income group mix is based on local <u>planning and needs assessment however it is not explicitly targeted to the poor.</u>

# **III. Basic Framework, Data and Assumptions**

# **1. Fiscal Incidence Framework**

Our fiscal incidence analysis assesses how personal income and consumption taxes along with the assessed social spending programs redistribute income amongst different deciles of the population (Box 3). Using this approach, it is possible to measure how the redistributive process implemented through these fiscal instruments impacts poverty and inequality. As such, the analysis does not provide an assessment of the drivers or causes of poverty or inequality.

# **Box 3. What Is Fiscal Incidence Analysis?**

Fiscal incidence analysis consists of allocating taxes and public spending (social spending in particular) to households or individuals so that one can compare incomes before taxes and transfers with incomes after taxes and transfers, where the latter may include the monetized value or consumption of free public services. In addition to assessing the impact of fiscal policy on the distribution of income, one may be interested in how taxes and transfers affect the welfare of different social groups such as groups of individuals differentiated by gender, ethnicity, or location.

The most common fiscal incidence analysis examines what is paid and received without assessing the behavioral responses that taxes and public spending may trigger on individuals or households. This is often referred to as the “accounting” approach and is adopted in this study. Put simply, the accounting approach consists of starting from a pre-fisc income and, depending on the fiscal intervention under study, allocating the proper amount of a tax or a transfer to each household or individual. If the fiscal intervention is a direct tax (transfer) and one starts the analysis from pre-tax (pre-transfer) income, the post-tax (post-transfer) income is calculated by subtracting (adding) the tax paid (transfer received).

More formally, let’s define before taxes and transfers income of unit _h_ as _Ih_ ,and net taxes of type _i_ as _Ti_ . Let us define the “allocator” of tax _i_ to unit _h_ as _Sih_ (or the share of net tax _i_ borne by unit _h_ ). Then, post-tax income of unit _h_ can be defined as: _Yh_ = _Ih_ - ∑i _TiSih._ Although the theory is quite straightforward, its application can be fraught with complications. Most of the complications arise because actual incidence can be quite different from statutory incidence (for example, due to tax evasion) and the data to calculate the actual incidence is incomplete or absent.

Fiscal incidence analysis can be partial or comprehensive. Partial fiscal incidence analysis assesses the impact of one or several fiscal policy interventions: for example, income taxes or the use of public education and health services. Comprehensive fiscal incidence analysis assesses the impact of the revenue and spending sides simultaneously: namely, the impact of direct and indirect taxes, cash and in-kind transfers, and indirect subsidies. Incidence analysis can use income or consumption (per capita or equivalized) to measure household welfare. In this study we assess fiscal policy on a partial and comprehensive basis and test the sensitivity of our findings using both income and consumption (i.e. disposable income) measures. Additionally, there is point-in-time vs. lifetime fiscal incidence analysis. The analysis can assess a current system or estimate the potential or actual effects of particular reforms. It can use the statutory incidence or the actual one (including tax evasion or less than full take-up of a cash transfer, for example). It can make different assumptions about tax shifting and the value of in-kind benefits. The analysis can assess the average incidence of a tax or benefit or it can assess the incidence on the margin: e.g., the distribution of an increase in the spending of public education.

Incidence studies use micro-data from household surveys or rely on incidence indicators from secondary sources. Since in practice surveys will not include information on every tax paid or transfer received (or the information even if it exists may be inaccurate), that information must be generated in a consistent and methodologically solid way. Frequently, the information will have to be generated using more than one method to check the sensitivity of 9