This paper evaluates the distributional, poverty, and efficiency impacts of North Macedonia’s tax–benefit system using microsimulation techniques based on the MKMOD model and the CEQ framework. Results show that fiscal policy reduces inequality by about 0.011 Gini points and has a strong effect on absolute poverty, lowering the headcount from 5.1 percent to 0.2 percent at $3/day. Social transfers drive these gains, while direct taxes and social contributions remain only mildly progressive. Efficiency analysis reveals that small, well-targeted programs—such as guaranteed minimum assistance, child allowances, and parental benefits—deliver the highest redistributive returns per unit spent, whereas contributory pensions and employment-linked benefits dominate fiscal space but yield weak redistributive outcomes. Policy priorities include scaling up efficient transfers, improving adequacy, phasing out regressive tax measures, and addressing the large informal economy to enhance equity and fiscal sustainability.
