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Estimating Tax Progressivity in Developing Countries: The Plato Index

Author

Listed:
  • Alex Cobham

    (Tax Justice Network)

  • Edmund FitzGerald

    (Oxford University)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

Progressive direct taxation is necessary to complement social protection, in order to reduce income inequality as well as poverty. A new metric of personal income tax incidence progressivity (the "Plato Index") is presented, using WIDER databases for income inequality (WIID) and tax revenues (GDR). Taxation is shown to be far less progressive in developing countries, than in developed ones (particularly Europe) although there are large variations within regional and income groups. There is significant correlation of direct tax progressivity not only with the level of economic development, but also with health and education provision. Both findings imply potential policy space for higher personal income tax pressure.

Suggested Citation

  • Alex Cobham & Edmund FitzGerald & Petr Jansky, 2021. "Estimating Tax Progressivity in Developing Countries: The Plato Index," Working Papers IES 2021/35, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2021.
    • Handle: RePEc:fau:wpaper:wp2021_35
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6564
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    More about this item

    Keywords

    direct taxation; tax progressivity; developing countries; fiscal incidence; social protection;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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