Estimating Tax Progressivity in Developing Countries: The Plato Index

Alex Cobham, Edmund FitzGerald and Petr Janský
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Edmund FitzGerald: Oxford University

No 2021/35, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Progressive direct taxation is necessary to complement social protection, in order to reduce income inequality as well as poverty. A new metric of personal income tax incidence progressivity (the "Plato Index") is presented, using WIDER databases for income inequality (WIID) and tax revenues (GDR). Taxation is shown to be far less progressive in developing countries, than in developed ones (particularly Europe) although there are large variations within regional and income groups. There is significant correlation of direct tax progressivity not only with the level of economic development, but also with health and education provision. Both findings imply potential policy space for higher personal income tax pressure.

Keywords: direct taxation; tax progressivity; developing countries; fiscal incidence; social protection (search for similar items in EconPapers)
JEL-codes: D12 H23 I32 O15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-35, Revised 2021
New Economics Papers: this item is included in nep-cwa, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2021_35

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