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

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.