Fiscal Policy and Equity: Estimation of the Progressivity and Redistributive Capacity of Taxes and Social Public Expenditure in the Andean Countries

Sep 2007
This study summarizes the assessment of the impact of fiscal policies on equity in the Andean countries. It evaluates the outcome of the main taxes and social public expenditures on income distribution applying a homogeneous methodology. The full effect of taxes is slightly regressive due to a weak personal income tax collection. The accumulated public social expenditure has a much higher redistributive impact. It improves the Gini coefficient by 5 percentage points, however, close to half the effect of developed economies (Organization for Economic Cooperation and Development - OECD). Considering taxes and social spending on a joint basis, the fiscal policy had a positive but insufficient redistributive effect.