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Redefining tax progressivity in developing countries: The Progressive Vertical Index

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  • Ricardo Guerrero Fernandez

Abstract

Recent evidence from developing countries shows that the bottom of the income distribution pays more taxes relative to their income than the top 1%, highlighting a lack of tax progressivity in these societies. Current measures of tax progressivity fail to indicate which part of the income distribution explains this. Following the Palma Ratio intuition, this paper introduces the concept of vertical progressivity and a new index, the Progressive Vertical Index (PVI), which assesses the relationship between the tax burdens of the top 1% and the bottom 50% of the population.

Suggested Citation

  • Ricardo Guerrero Fernandez, 2024. "Redefining tax progressivity in developing countries: The Progressive Vertical Index," WIDER Working Paper Series wp-2024-65, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2024-65
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    References listed on IDEAS

    as
    1. Nanak Kakwani & Hyun Hwa Son, 2021. "Normative Measures of Tax Progressivity: an International Comparison," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(1), pages 185-212, March.
    2. Duane Swank, 2016. "The new political economy of taxation in the developing world," Review of International Political Economy, Taylor & Francis Journals, vol. 23(2), pages 185-207, April.
    3. Andriani, Luca & Bruno, Randolph & Douarin, Elodie & Stepien-Baig, Paulina, 2022. "Is tax morale culturally driven?," Journal of Institutional Economics, Cambridge University Press, vol. 18(1), pages 67-84, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Income distribution; Tax progressivity; Effective tax rate; Income inequality; Latin America;
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