IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/11367.html

Horizontal Equity of Taxation : Citizen Beliefs and Policy Preferences

Author

Listed:
  • Bachas, Pierre
  • Hoy, Christopher Alexander
  • Jensen, Anders
  • Shaukat, Mahvish Ifrah

Abstract

Horizontal inequity occurs when employees and self-employed workers with the same income end up with different effective tax burdens, due to the difficulty of enforcing taxes on the self-employed. Based on detailed micro-tax simulation models integrated with household surveys in 25 developing countries, this paper shows that tax systems incur large horizontal inequities in practice, and reforms that improve vertical equity worsen horizontal equity by a comparable amount. In-person 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.

Suggested Citation

  • Bachas, Pierre & Hoy, Christopher Alexander & Jensen, Anders & Shaukat, Mahvish Ifrah, 2026. "Horizontal Equity of Taxation : Citizen Beliefs and Policy Preferences," Policy Research Working Paper Series 11367, The World Bank.
  • Handle: RePEc:wbk:wbrwps:11367
    as

    Download full text from publisher

    File URL: https://documents.worldbank.org/curated/en/099718004292611926/pdf/IDU-f60b8c60-6d92-476c-a734-eee919818e57.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 147-174, Fall.
    2. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    3. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
    4. Best, Michael & Caloi, Luigi & Gerard, Francois & Kresch, Evan & Naritomi, Joana & Zoratto, Laura, 2025. "Greener on the Other Side: Inequity and Tax Compliance," CEPR Discussion Papers 20510, Centre for Economic Policy Research.
    5. Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2023. "Designing Information Provision Experiments," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 3-40, March.
    6. Christopher Axelson & Antonia Hohmann & Jukka Pirttilä & Roxanne Raabe & Nadine Riedel, 2024. "Taxing top incomes in the emerging world: Economic impact under the microscope," WIDER Working Paper Series wp-2024-37, World Institute for Development Economic Research (UNU-WIDER).
    7. Anders Jensen, 2022. "Employment Structure and the Rise of the Modern Tax System," American Economic Review, American Economic Association, vol. 112(1), pages 213-234, January.
    8. Hoy, Christopher, 2025. "How does progressivity impact tax morale? Experimental evidence across developing countries," Journal of Development Economics, Elsevier, vol. 172(C).
    9. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.
    10. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, May.
    11. Kristoffer B Hvidberg & Claus T Kreiner & Stefanie Stantcheva, 2023. "Social Positions and Fairness Views on Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 3083-3118.
    12. Bracco, Emanuele & Porcelli, Francesco & Redoano, Michela, 2019. "Political competition, tax salience and accountability. Theory and evidence from Italy," European Journal of Political Economy, Elsevier, vol. 58(C), pages 138-163.
    13. Mounir Karadja & Johanna Mollerstrom & David Seim, 2017. "Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 201-212, May.
    14. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    15. Garriga, Pablo & Tortarolo, Dario, 2024. "Firms as tax collectors," Journal of Public Economics, Elsevier, vol. 233(C).
    16. Huang, Jason & Rios, Juan, 2016. "Optimal tax mix with income tax non-compliance," Journal of Public Economics, Elsevier, vol. 144(C), pages 52-63.
    17. Cruces, Guillermo & Perez-Truglia, Ricardo & Tetaz, Martin, 2013. "Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 100-112.
    18. Jason DeBacker & Bradley T. Heim & Anh Tran & Alexander Yuskavage, 2015. "Legal Enforcement and Corporate Behavior: An Analysis of Tax Aggressiveness after an Audit," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 291-324.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jan Behringer & Lukas Endres & Maike Korsinnek, 2025. "Cost perceptions and the support for carbon pricing," IMK Working Paper 226-2025, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Muhammad Khudadad Chatta, 2020. "Do Deadline Extensions Encourage Tax Filing? Evidence from Pakistan," CSAE Working Paper Series 2020-21, Centre for the Study of African Economies, University of Oxford.
    3. Haaland, Ingar & Olden, Andreas, 2021. "Information about Fewer Audits Reduces Support for Economic Relief Programs," Discussion Papers 2021/2, Norwegian School of Economics, Department of Business and Management Science.
    4. Marie Bjørneby & Annette Alstadsæter & Kjetil Telle, 2018. "Collusive tax evasion by employers and employees. Evidence from a randomized fi eld experiment in Norway," Discussion Papers 891, Statistics Norway, Research Department.
    5. Jessen, Lasse J. & Koehne, Sebastian & Nüß, Patrick & Ruhose, Jens, 2024. "Socioeconomic Inequality in Life Expectancy: Perception and Policy Demand," IZA Discussion Papers 16780, IZA Network @ LISER.
    6. Xiaogeng Xu & Satu Metsälampi & Michael Kirchler & Kaisa Kotakorpi & Peter Hans Matthews & Topi Miettinen, 2023. "Which income comparisons matter to people, and how? Evidence from a large field experiment," Working Papers 10, Finnish Centre of Excellence in Tax Systems Research.
    7. Blesse, Sebastian & Lergetporer, Philipp & Pache, Clara-Marie & Zeidler, Helen, 2026. "Do People Support Information Campaigns about Inequality?," IZA Discussion Papers 18694, IZA Network @ LISER.
    8. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    9. Bierbrauer Felix J., 2016. "Effizienz oder Gerechtigkeit?: Ungleiche Einkommen, ungleiche Vermögen und Optimale Steuern," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(1), pages 2-24, April.
    10. Tsvetkova, Milena & Olsson, Henrik & Galesic, Mirta, 2024. "Social networks affect redistribution decisions and polarization," OSF Preprints bw7ux_v1, Center for Open Science.
    11. Ingar Haaland & Christopher Roth, 2023. "Beliefs about Racial Discrimination and Support for Pro-Black Policies," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 40-53, January.
    12. Moore, Don A. & Choudhari, Rene & Wu, Aileen, 2025. "Does the prospect of upward mobility undermine support for redistribution?," Journal of Public Economics, Elsevier, vol. 248(C).
    13. Pierre Bachas & Lucie Gadenne & Anders Jensen, 2024. "Informality, Consumption Taxes, and Redistribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(5), pages 2604-2634.
    14. Hauck, Tobias & Wallossek, Luisa, 2024. "Optional (non-)filing and effective taxation," Journal of Public Economics, Elsevier, vol. 238(C).
    15. Deparade, Darius & Jarmolinski, Lennart & Mohr, Peter, 2025. "Behavioral interventions, tax compliance and consequences on inequality," Discussion Papers 2025/4, Free University Berlin, School of Business & Economics.
    16. Harju Jarkko, 2014. "Policy evaluation methods in tax research – new evidence and interpretations," Nordic Tax Journal, Paradigm, vol. 2014(1), pages 76-92, May.
    17. Hänsel, Martin C. & Franks, Max & Kalkuhl, Matthias & Edenhofer, Ottmar, 2022. "Optimal carbon taxation and horizontal equity: A welfare-theoretic approach with application to German household data," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    18. Riccardo Bruni & Alessandro Gioffré & Maria Marino, 2025. "In‐group bias in preferences for redistribution: a survey experiment in Italy," Economica, London School of Economics and Political Science, vol. 92(367), pages 1009-1080, July.
    19. Juliana Londoño-Vélez, 2022. "The Impact of Diversity on Perceptions of Income Distribution and Preferences for Redistribution," NBER Working Papers 30386, National Bureau of Economic Research, Inc.
    20. Sebastian Blesse & Philipp Lergetporer & Clara-Marie Pache & Helen Zeidler, 2026. "Do People Support Information Campaigns About Inequality?," CESifo Working Paper Series 12708, CESifo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:11367. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.