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Revisiting personal income tax in Latin America: Evolution and impact

Alberto Barreix, Juan Carlos Benítez and Miguel Pecho
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Alberto Barreix: Inter-American Development Bank
Juan Carlos Benítez: OECD Development Centre
Miguel Pecho: Inter-American Center of Tax Administrations

No 338, OECD Development Centre Working Papers from OECD Publishing

Abstract: This study documents the process through which standard tax reliefs and tax allowances reduce the taxable base of the Personal Income Tax (PIT) in Latin American countries by using the models developed in Taxing Wages in Latin America and the Caribbean 2016. The theoretical estimations on the personal income tax are complemented with data from the tax administrations. The study finds that the PIT is progressive, but only paid by a small proportion of formal high-wage earning individuals. On average, more than 80% of the PIT is paid by the richest ten per cent of the population but at average effective rates below the region’s average statutory minimum tax schedule rate. The combination of these factors results in the PIT having a scant revenue-raising capacity and a meagre impact on income redistribution.

Keywords: Personal income tax; tax deductions; tax exemptions; tax system; wage distribution (search for similar items in EconPapers)
JEL-codes: D31 H24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-lam, nep-ltv and nep-pbe
Date: 2017-03-30
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Persistent link: https://EconPapers.repec.org/RePEc:oec:devaaa:338-en

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