Taxes and duties and their impact on poverty

Welfare states need to be financed, as part of the role of the welfare states is redistribution – both over a life-time and between rich and poor. This is why it is important to have a tax and duty system, but also a system where the choices between instruments can have different implications for the impact on the level of poverty. The more progressive taxes the higher is the probability of redistributive impact of the welfare policies. So, both the size of the tax and duty system and the specific way it is implemented will influence the degree to which they will impact on the development and size of poverty in different countries.