No abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract:We analyse the effect of taxes and benefits on income distribution of six Latin American countries: Argentina, Bolivia, Colombia, Ecuador, Uruguay, and Venezuela. Our analysis makes use of tax-benefit microsimulation models based on harmonized household representative survey data and developed within the structure of EUROMOD. The analysis focuses on the relative importance of tax-benefit instruments across countries and on the effect of taxes and benefits on poverty and inequality. The selected countries represent a wide range of cases in terms of the redistributive role of the tax-benefit system with Uruguay providing a large degree of redistribution, whereas the Bolivian system has a very modest role. We further exploit the advantages of our models and perform a simulation exercise whereby the most progressive income tax system of our set of countries is applied to the rest and assess its effect on inequality and revenue. Our paper represents the first study making use of microsimulation techniques to assess the redistributive role of tax-benefit systems in the region in a comparable manner, and highlights the advantages offered by microsimulation models to evaluate the effect of policy reforms aiming to improve social protection in the region. Acknowledgements:The results presented here are based on three projects: (i) LATINMOD a project sponsored by CELAG, funded by BANDES and with the collaboration of EUROMOD. (ii) ECUAMOD v1.0. ECUAMOD is developed, maintained and managed by UNU-WIDER in collaboration with the EUROMOD team at ISER (University of Essex), SASPRI (Southern African Social Policy Research Institute) and local partners in selected developing countries (Ethiopia, Ghana, Mozambique, Tanzania, Zambia, Ecuador and Viet Nam) in the scope of the SOUTHMOD project. The local partner for ECUAMOD is Instituto de Altos Estudios Nacionales (IAEN). (iii) COLMOD, project developed independently by David Rodriguez. We are indebted to the many people who have contributed to the development of LATINMOD, SOUTHMOD and ECUAMOD. We are grateful to Pia Rattenhuber and participants to the SOUTHMOD workshop in Helsinki for useful comments on earlier versions of the paper. The results and their interpretation presented in this publication are solely the authors' responsibility.

This study has been prepared within the UNU-WIDER project on 'SOUTHMOD-Simulating Tax and Benefit Policies for Development' which is part of the Institute's larger research project on 'The economics and politics of taxation and social protection'.

This study has been prepared within the UNU-WIDER project Women's work -routes to economic and social empowerment.

The aim of this paper is twofold. First, it provides a comprehensive assessment of the financial disincentives to enter formal employment implied by the design of the tax-benefit system in five Latin American countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela. Then, it analyzes the extent to which formalizing informal workers would contribute to increase fiscal capacity in the region. The results show a wide variation in financial disincentives to enter formal employment, with formalization tax rates ranging between 8.5 percent in Venezuela and 42 percent in Colombia. Formalization tax rates are particularly high for self-employed informal workers, and mainly driven by the high costs associated with social insurance contributions. The analysis further shows that potential entries to formal employment would raise tax revenue in all countries, but mainly through the effect of increased social insurance contributions, whereas personal income tax revenue would have a marginal contribution, except in Bolivia and Venezuela. Interestingly, potential formalization of informal workers with the highest probability of being formal would allow capturing a substantial share of the additional tax revenue lost due to informality.