Horizontal Equity of Taxation: Citizen Beliefs and Policy Preferences

Pierre Bachas (), Christopher Hoy (), Anders Jensen () and Mahvish Shaukat ()
Additional contact information
Pierre Bachas: World Bank Group, https://www.worldbank.org/en/about/people/p/pierre-bachas
Christopher Hoy: Melbourne Institute of Applied Economic and Social Research, https://findanexpert.unimelb.edu.au/profile/1123396-christopher-hoy
Anders Jensen: Harvard Kennedy School, https://www.hks.harvard.edu/faculty/anders-jensen
Mahvish Shaukat: World Bank Group

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: Horizontal inequity occurs when employees and self-employed with the same income end up with different effective tax burdens, due to the difficulty of enforcing taxes on self-employed. Based on detailed micro-tax simulations models integrated with house hold surveys in 29 developing countries, we show that tax systems incur large horizontal inequities in practice and that reforms which improve vertical equity worsen horizontal equity by a comparable amount. An in-person survey in Pakistan and online surveys across multiple countries reveal widespread concern about horizontal equity. Randomized information treatments heighten this concern but do not shift tax preferences toward addressing horizontal inequity.

Keywords: Horizontal inequity; vertical equity; personal income tax; citizen beliefs (search for similar items in EconPapers)
JEL-codes: C93 D72 H22 H24 H26 (search for similar items in EconPapers)
Pages: 127pp
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