A Webinar on Evidence-Based Fiscal Policy Tools to Improve Equity : Insights from an implementing organisation

On 14 September 2022, the Addis Tax Initiative (ATI) organised the first session of the webinar series on Evidence-Based Fiscal Policy to Improve Equity. This webinar series provided an overview of the comprehensive toolkit comprised of a set of highly complementary tools – the Enhanced Equity Budgeting Tool (EBT), Commitment to Equity and Fiscal Incidence Analysis (CEQ-FIA) and the microsimulations built on the CEQ-FIA framework. This toolkit has been jointly developed by the Global Development Network (GDN) and the World Bank with the support of the German Development Cooperation (GIZ). The webinar also featured a presentation on the implementation of this toolkit in Guatemala. The event brought together participants from different ATI partner countries, development partners, and supporting organisations. Mr Jon Jellema from GDN delivered both presentations and Ms Michelle Ordóñez from the ATI Secretariat moderated the session on behalf of ATI Consultative Group 1.

Budgeting process

In the first presentation, Mr Jellema shared an overview of the three tools that can be used to comprehensively assess the impact of fiscal policies. The presentation commenced by pointing out the relevance of the enhanced EBT, CEQ-FIA and microsimulations in providing governments with solid empirical data on the actual impact of policies, which can be a crucial input to the policymaking process. As Mr Jellema illustrated, these tools can be applied at different phases of the budget cycle (i.e., deliberation, execution, and review phases). Accordingly, EBT is a framework which can be used to analyse the extent to which reduction of inequality is reflected in the drafting and execution phase of the budget cycle. EBT uses both primary (proprietary data through stakeholder engagement, interviews, workshops, household budget survey, etc.) and secondary data sources (e.g., public expenditure reviews) to identify political constraints impeding the progress on equity related goals. However, the EBT relies more on proprietary data and is therefore more qualitative than the other two tools.


The FIA is another important component of the toolkit and is more suitable for the budget implementation phase. The CEQ which is developed by the CEQ Institute, is one variant of the FIA. FIA estimates the net impact of fiscal policy on an individual, family or household level using micro-data collected through the household budget survey. In this vein, the FIA provides a better picture of the ways in which different groups are either better or worse off as a result of fiscal policy. This indicator could thus estimate the impact of fiscal policy on equity goals, such as inequality, fiscal impoverishment, and progressivity. Lastly, the third element of the toolkit – the microsimulation tool – provides a contextual and empirical estimate of potential policy reforms. It can be a powerful tool when used in the review phase of the budget cycle. Mr Jellema concluded the first presentation by emphasising that the toolkit, which includes the three instruments mentioned above, is less costly and requires fewer staff compared to other available instruments. Most importantly, the methodology is relatively more transparent than others.

In the first Q&A session, a participant posed a question about when and where these tools should be used, as well as the quality of the data that goes into these tools, the validation process. Mr Jellema elaborated that while the compilation of data for these tools is possible at any time, the engagement of government actors is crucial for obtaining quality data, including proprietary data.

The second presentation provided an overview on the early implementation of enhanced EBT in Guatemala, focusing on health services. EBT and CEQ assessments have already been carried out in Guatemala from 2015 to 2018. The GDN is currently trying to develop a better analytical tool based on the results of the two separate analyses conducted with the old EBT and the CEQ. This in turn will provide Guatemalan health sector policymakers with a better understanding of these results and ways to reform their policies to achieve greater equity in the health sector. The current exercise seeks to develop a better analytical tool using the results of the old EBT and CEQ analysis.

The results of the previous assessments in Guatemala revealed some concerns in the healthcare services sector. On the one hand, the result of the old EBT assessment showed that the poor and extremely poor are more likely to use public health services than the non-poor. On the other hand, the CEQ assessment showed that the provision of health services to the poor in urban areas is low, partly due to inadequate health infrastructure in the areas where the poor live. However, as Mr Jellema elucidated, the problem is neither an expenditure nor a revenue problem. The CEQ analysis uncovered that the bottom 40% of the population pay up to 8% of their income in indirect taxes, but receive less in indirect subsidies, which account for up to 1.7% of their income. This leads to fiscal impoverishment, as the poor section of society pays more through indirect taxes than they receive in benefits or subsidies. On top of that, there are additional fees, such as transportation costs, which creates additional burden for this income group to access healthcare services. As a result, the next step of this analysis in Guatemala will need to look more closely at the fees charged by healthcare service providers and use the regional disaggregation available in the CEQ assessment to identify exactly where and why these fees might be a burden. The next phase also incorporates the revenue aspect in the EBT, which will transform it into enhanced EBT (or EBT+) and update the CEQ assessment.

The second round of open discussion and Q&A addressed some questions from the audience. When asked about the potential challenges that countries interested in implementing these tools may face, Mr Jellema emphasized that the biggest challenge is ensuring government cooperation and participation in the process. While FIA can be conducted anonymously, understanding how policies are executed and who benefits from those policies requires insights from the relevant government agencies. In response to another question about the overview of countries implementing at least one of these tools and the extent to which lessons drawn from this analysis inform the policymaking process, Mr Jellema stated that there is no systematic way to assess the extent to which the lessons learnt inform the policymaking process. However, GDN is part of the “Research to Action” initiative to track the impact of social science research, which could help fill this gap. In terms of the number of countries implementing these tools, given that one of the indicators available from the FIA - the redistributive impact of fiscal policy - has become an official SDG indicator for Goal 10 (reduce inequality) and Target 10.4 (adopt fiscal and social policies to progressively reduce inequality), more countries are expected to conduct the FIA more frequently than they have in the past. Finally, on a question about how interested countries can access these tools and whether they can do the analysis themselves, Mr Jellema emphasised that while it is possible to conduct the analysis with available resources, it would be helpful to work with organisations that have expertise in this area, especially when doing so for the first time. One round of FIA or EBT analysis is sufficient to create institutional and practical knowledge to subsequently conduct this analysis with minimal or no external involvement.

The second session of this webinar series, which will include perspectives of partner country representatives and organisations implementing these toolkits at the national level, is planned for November 2022.