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The redistributive potential of taxation in Latin America

Author

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  • Hanni, Michael
  • Martner Fanta, Ricardo
  • Podestá, Andrea

Abstract

This study uses internationally comparable methodologies to analyse the distributional impact of income tax and public transfers in 17 countries of Latin America. The results indicate that fiscal policy plays a limited role in improving the distribution of disposable income; the Gini coefficient decreased by barely three percentage points after direct fiscal action. On average, 61% of this reduction was due to public cash transfers and the rest to direct taxes, reflecting the pressing need for personal income tax to be strengthened. Analysis of household surveys gives an indication of the potential effects of tax reforms aimed at increasing the average effective tax rate of the top income decile. Allocating this additional revenue to targeted transfers would produce significant results. Consequently, tax reforms must be evaluated bearing in mind how those resources are used.

Suggested Citation

  • Hanni, Michael & Martner Fanta, Ricardo & Podestá, Andrea, 2015. "The redistributive potential of taxation in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    • Handle: RePEc:ecr:col070:39603
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    Cited by:

    1. Sanjeev Gupta & João Tovar Jalles, 2020. "Tax Revenue Reforms and Income Distribution in Developing Countries," Working Papers REM 2020/0137, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    2. Neu, Dean, 2023. "Fragile assets: Street gangs and the extortion business," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 95(C).
    3. Andres Irarrazaval, 2022. "The Fiscal Origins of Comparative Inequality levels: An Empirical and Historical Investigation," Working Papers wp531, University of Chile, Department of Economics.
    4. Irarrázaval, Andrés, 2020. "The fiscal origins of comparative inequality levels: an empirical and historical investigation," Economic History Working Papers 107491, London School of Economics and Political Science, Department of Economic History.
    5. -, 2018. "The Inefficiency of Inequality," Documentos de posición del período de sesiones de la Comisión 43443, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Bruno Martorano, 2018. "Taxation and Inequality in Developing Countries: Lessons from the Recent Experience of Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(2), pages 256-273, March.
    7. Gupta, Sanjeev & Jalles, João Tovar, 2022. "Do tax reforms affect income distribution? Evidence from developing countries," Economic Modelling, Elsevier, vol. 110(C).
    8. Irarrázaval, Andrés, 2020. "The fiscal origins of comparative inequality levels: an empirical and historical investigation," LSE Research Online Documents on Economics 107491, London School of Economics and Political Science, LSE Library.
    9. Bruno Martorano, 2018. "Taxation and Inequality in Developing Countries: Lessons from the Recent Experience of Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(2), pages 256-273, March.
    10. -, 2017. "Fiscal Panorama of Latin America and the Caribbean 2017: Mobilizing resources to finance sustainable development," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 41047 edited by Eclac.
    11. Andrey A. Pugachev, 2023. "Impact of the Level and Structure of the Tax Burden on Citizens Inequality," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 59-77, June.
    12. Gómez-Arteaga, Natalie & Ocampo, José Antonio, 2017. "Social protection systems, redistribution and growth in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    13. repec:idq:ictduk:12799 is not listed on IDEAS
    14. -, 2018. "The challenges facing Latin America and the Caribbean regarding financing for the 2030 Agenda for Sustainable Development," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 43421 edited by Eclac.
    15. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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