Measuring Tax Progressivity in Low-Income Countries

Alastair Geoffrey Arthur Thomas

No 10460, Policy Research Working Paper Series from The World Bank

Abstract: In addition to raising revenue, tax systems have a key role to play in achieving countries’ equity goals. An important first step in assessing whether a particular tax system is appropriately supporting those equity goals is to assess the degree of progressivity of the tax system. However, measuring the progressivity of a tax system is challenging for several reasons. Most significantly, data limitations have a large impact on what taxes can be examined, what measurement approaches can be adopted to examine those taxes, and how reliable those approaches are likely to be. This is particularly important for low-income countries where data limitations are typically most significant. Furthermore, there is no single definition of progressivity, or single method for measuring the degree of progressivity of a tax—thereby necessitating a range of decisions and value judgements to be made in any analysis. This paper examines and assesses the potential approaches that may be adopted to measure the progressivity of tax systems, and proposes a set of metrics to assess tax progressivity in low-income International Development Association (IDA) countries.

Date: 2023-05-30
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