## _Indirect Taxes and Subsidies_

Both VAT and excise taxes increase inequality and poverty regardless of gender. Although VAT and excise taxes are unequalizing for both men and women, VAT appears to be more unequalizing for men, suggesting that the burden of VAT falls more on men, possibly because men consume more alcohol and tobacco, which have higher VAT (EPHI 2016). The poverty-increasing effect of indirect taxes is higher than that of direct taxes for both men and women. However, indirect taxes are poverty-increasing mainly for women. The poverty-inducing effect of VAT is stronger for women and the effect of excise tax is stronger for men (Table 6). The findings suggest that people near the poverty threshold consume both food and non–food items that are subject to indirect taxes.

Indirect subsidies are unequalizing mainly because of the effect of wheat subsidy. Although unequalizing, the wheat subsidy appears to be poverty-reducing for both women and men. However, kerosene subsidy has little effect on inequality- and poverty-reduction.

## _Education_ and Health Spending

Public spending on education is unequalizing and poverty-reducing. The unequalizing effect is mainly the result of how much is spent on secondary and tertiary education (Table 6). The povertyreducing impact on girl students is powerful. Disaggregating the results by level of education, regardless of gender, spending on primary education has been found to be equalizing and poverty-reducing. Importantly, primary education has dramatically reduced poverty for girls. Both secondary and tertiary spending, though unequalizing, reduce poverty. Health spending is for both genders equalizing and poverty-reducing (Tables 6), though more so for women than for men.

# **5. Conclusion**

Using the Commitment to Equity methodology, this study investigates differences in the welfare impact of taxes and government spending on men and women in Ethiopia. It analyzes the incidence, progressivity, and pro-poorness of various taxes and transfers and their effect on income mobility, poverty and inequality. The study uses data from the 2018/19 Ethiopia Socioeconomic Survey, which collected individual level information on such variables as labor market outcomes, land ownership, transfers, and formal and informal taxes. In addition, the study generated individual-level income using a combination of intrahousehold allocation approaches. The gendered distributional impacts of fiscal policy are then examined at different income concepts.

The net fiscal system is progressive, equalizing, and poverty-reducing. It moved about one in five individuals from one income group to another, and more women than men transitioned to a higher income group, making them relatively better-off. However, different elements of taxes and transfers are found to have different effects on men and women. Direct taxes are progressive and equalizing, but their progressivity and inequality-reducing effects are stronger for men. Informal taxes and agricultural income taxes appear to be regressive, unequalizing, and poverty-inducing. However, informal taxes do have more poverty effects on women. Agricultural income taxes and land user fees, levied mostly on rural households, are regressive and exacerbate poverty. In part, this reflects the fact that agricultural households tend to be poorer than non-agricultural 23