3, September, 2012

Taxes, Transfers, and Income Redistribution in Latin America

How much reduction in inequality and poverty does Latin America accomplish through taxes and transfers? How progressive are revenue-collection and social-spending patterns? This new 'Inequality in Focus' Brief from the World Bank's Poverty Reduction and Equity Department explores these questions.

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An in-depth fiscal incidence analysis applied to Argentina’s urban areas, where three-fourths of the population lives, as well as to Bolivia, Brazil, Mexico, Peru, and Uruguay, finds the following:


1. The extent of income redistribution and poverty reduction varies significantly across countries.


2. There is little correlation between government size and the extent and effectiveness of redistribution and poverty reduction.


3. Large-scale targeted cash transfers that cover a high proportion of the poor can achieve significant reductions in extreme poverty.


4. At present, personal income taxes achieve little in the form of redistribution.


5. When indirect taxes are taken into account, the net income of the poor and the near poor can be lower than it was before taxes and cash transfers.


6. The poor and near-poor benefit substantially from in-kind transfers in education and health. These in-kind transfers are quite progressive in all countries studied.

Author: Nora Lustig
Orginal publication date: July, 2012
Publisher: World Bank - Poverty Reduction and Equity Department


Click here to download the complete document in PDF format


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