Redefining tax progressivity in developing countries: The Progressive Vertical Index

Ricardo Guerrero Fernandez

No wp-2024-65, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Recent evidence from developing countries shows that the bottom of the income distribution pays more taxes relative to their income than the top 1%, highlighting a lack of tax progressivity in these societies. Current measures of tax progressivity fail to indicate which part of the income distribution explains this. Following the Palma Ratio intuition, this paper introduces the concept of vertical progressivity and a new index, the Progressive Vertical Index (PVI), which assesses the relationship between the tax burdens of the top 1% and the bottom 50% of the population.

Keywords: Income distribution; Tax progressivity; Effective tax rate; Income inequality; Latin America (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-pbe and nep-pub
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