? Strict eligibility criteria. Tightening eligibility rules (e.g., based on past employment and contributions or mandatory participation in ALMPs) reduces fiscal cost by incentivizing the return to employment or channeling more of the unemployed to social assistance with lower benefits.
? Short duration. Lowering the maximum duration of benefit eligibility can expedite the return to employment or the transition to social assistance. About a third of OECD countries have a maximum duration in excess of 12 months.
? Declining benefit levels. Reducing replacement rates with unemployment duration provides strong incentives to return to employment. The desired generosity of benefits can be achieved through various combinations of benefit level and duration.
? Individual unemployment savings accounts (ISAs). Increased use of these accounts could help to reduce the distortionary impact of contributions by strengthening the link with benefits received and could also facilitate the expansion of unemployment insurance schemes in developing economies with large informal sectors. For example, under this system, part of the unemployment insurance contribution could be credited to an individual account on which a person receives interest (Bovenberg and others, 2012). During a period of unemployment, individuals can draw money from their account. Once the account is exhausted, individuals can borrow from the government at the same interest rate. Individual accounts are used in a number of emerging economies, including Brazil and Chile (Hijzen and Venn, 2011).
48. Education reforms in both advanced and developing economies could focus on improving access by low-income groups. The regressive benefit incidence of education spending in developing economies reflects lower access by low-income groups to higher levels of education (including upper secondary and tertiary education). In advanced economies, although education spending as a whole is progressive, tertiary education spending tends to be regressive. This lack of access to education in both developing and advanced economies also results in inequality of opportunity and perpetuates inequality across generations. A range of spending reforms focused on improving access can help to enhance the distributional impact of education spending, including:
? Increasing investment in lower levels of education. The main driver behind the regressivity (or lower progressivity) of public education spending is the large share of the budget allocated to higher levels of education, which are disproportionally accessed by higher income groups. Lack of access for lower income groups to higher levels is primarily due to lack of progress through lower education levels. In developing economies, this requires improving access to and progression through primary and lower-secondary education, especially for girls and in rural areas. In advanced economies, this requires improving access to, progression through, and performance in higher-secondary and tertiary education. Increasing access to early childhood education is required in both advanced and developing economies, especially given the substantial evidence that this has a crucial impact on education performance at higher levels.
? Improvements in the efficiency of education spending. Increased spending on education at lower levels should be complemented by efforts to get better results from existing levels of spending. Inefficiencies in spending are substantial, including in low-income economies (Gupta and others, 2007; Grigoli, forthcoming).
? Increased cost recovery in tertiary education. Demand for tertiary education has increased rapidly in both advanced and developing economies, and often faster than public financing capabilities. This has resulted in a decline in the quality of instruction in public institutions and a growth in private education institutions (Woodhall, 2007; OECD, 2011b). Since much of the benefit from tertiary education accrues to graduates in the form of higher earnings and other non-monetary benefits, there is a strong case for financing more of this cost from tuition fees. Income-contingent student loans to cover tuition and subsistence costs allow students to begin paying off their loans once they start earning, ensure that higher education is free at the point of use, and provides insurance against the inability to repay due to low future income (Barr, 2012). Increasing private financing also allows tertiary education to expand without increasing public spending.
? Targeted conditional cash assistance. As discussed above, targeting cash assistance to those with disadvantaged access to education, and conditioning this assistance on certain education outcomes, can help to reduce income barriers to education and incentivize improved education achievement. This "conditional cash transfer" strategy is being increasingly used in both advanced and developing economies. Additional complementary reforms may also be necessary, such as targeted information campaigns and increasing availability of shorter term qualification options…
50. In advanced economies, maintaining the access of the poor to health care services during periods of expenditure constraint is consistent with efficient redistribution. Public health care spending is a large share of total public spending and is projected to rise by almost 3 percentage points of GDP between 2013 and 2030 (Clements, Coady, and Gupta, 2012; IMF, 2013b). Health care reforms to curb the growth of spending will be a necessary component of many countries" fiscal adjustment plans. Some of these reforms could take the form of an increase in cost-sharing with the private sector, for example through increased co-payments, or a reduction in the scope of services provided by the public sector. These reforms could be designed to ensure that the poor maintain access to services, for example, by exempting them from co-payments.
C. Tax Design
51. While the primary contribution of taxation to the pursuit of equity goals is through financing spending measures, they can also in themselves efficiently contribute to achieving redistributive goals. Previous sections have shown that the mix of direct and indirect tax instruments, as well as the details of their design and other tax policies, have important distributional implications. Tax structures were seen to vary significantly across advanced and developing economies, reflecting different stages of development and administrative capacities. The redistributive role of taxation depends on the progressivity of income-related taxes (including not just personal income tax (PIT) but also, in particular, means-tested transfers), the taxation of capital income and wealth that are concentrated among the better off, and the design of indirect taxes. This section explores how such tax policies could be designed, looking in turn at income taxes (on wages, capital income, and business income), wealth taxes (including those on property, transactions, and inheritances) and consumption taxes.
52. Many advanced and developing economies can achieve their redistributive objectives more efficiently through increasing the progressivity of their tax and transfer systems. These include the PIT, social contributions, as well as negative income taxes and targeted transfer schemes, which were discussed in the previous section. In developing economies, the main challenge is to develop a better-functioning PIT system that helps increase tax ratios. In advanced economies, more progression can be achieved through reform of PIT rate schedules, reducing exemptions, and by setting sufficiently high thresholds.
? Implementing progressive PIT rate structures can contribute to reducing inequality. The median top PIT rate (based on a large group of economies across the globe) dropped from 59 percent in 1980 to 30 percent today (Figure 12). Since the mid-1990s, 27 countries -especially in Central and Eastern Europe and Central Asia– have introduced flat tax systems, usually with a low marginal rate. These regimes are typically less redistributive than those with stepwise increasing PIT rates, especially for top incomes. In these and other economies with relatively low top PIT rates -or in economies where the top PIT bracket starts at a relatively high level of income 40- there may be scope for more tax progression at the top. Note, however, that behavioral distortions impose an upper limit as to how far these top PIT rates can be increased. For instance, IMF (2013b) finds that revenue-maximizing PIT rates are probably somewhere between 50 and 60 percent -and optimal rates probably somewhat lower than that, depending on the welfare weights assigned to the rich…
? Raising progressivity also requires reconsideration of tax deductions. Many economies -including developing ones- adopt various tax allowances in their PIT related to children, education, housing, health insurance, commuting and charitable donations. Some accrue disproportionately to the rich, such as deductions for mortgage interest. This is because households with high incomes are more often homeowners, and tax relief is often granted in the form of deductions, which are worth more at higher marginal tax rates. Rationalizing mortgage interest deductibility could complement steps towards a more progressive tax system and also improve efficiency, since these deductions create their own distortions (IMF, 2009). More generally, tax expenditures of this kind often come along with significant revenue losses. In many countries, these might not be subject to the same public scrutiny as ordinary public spending, especially when the governments does not publish a tax expenditure review. Tax expenditures should undergo to the same cost-benefit analysis as spending measures. Some, but not all, tax deductions might well be justified on the basis of their implications for equity and efficiency, such as deductions for charitable giving…
? Reforming the PIT threshold can, in some cases, enhance tax progression. A threshold -either in the form of a zero-tax bracket, a basic deduction or a general tax credit- supports tax progression by reducing or eliminating the tax burden on people with the lowest incomes. Thresholds vary significantly across economies. In the OECD, the median is approximately 25 percent of the average wage. Several emerging and developing economies, however, have no threshold at all (USAID, 2013) and introducing one could relieve the poorest households from the obligation (often more in principle than practice) to pay tax and ease administration. However, the threshold should not be too high, as this can lead to greatly reduced revenues. In 16 developing economies, for instance, the threshold exceeds two times GDP per capita. This contributes to the small coverage of the PIT and a low revenue yield, thus undermining redistributive income taxation. Note also that tax credits are in principle more progressive than tax deductions, since the value of a credit does not depend on the marginal tax rate faced by the taxpayer, as is the case with a deduction.
53. Taxes on capital income can strengthen the progressivity of the tax system, but high rates can have substantial efficiency costs. Taxpayers who save and invest are generally among the better off, so even a proportional tax on capital income can increase progressivity. Moreover, taxing capital income is necessary to mitigate arbitrage in the taxation of entrepreneurial income, as it is often difficult (or even impossible) to distinguish labor from capital income earned by the owner-directors of a firm. The latter makes it important to broadly harmonize the rates of the PIT and the combined burden of Corporate Income Tax (CIT) and dividend/capital gains taxation. However, capital income taxes, if too high, can have high efficiency costs because of their distortionary effects on savings and investment. Moreover, it can be administratively difficult to tax capital in light of its mobility, with the latter leading to ample evasion and avoidance opportunities. In addition the mobility of capital allows firms to shift a large share of the burden of these taxes onto labor, as discussed earlier. To strike the right balance between equity and efficiency, governments could consider the following options:
? Tax different types of capital income in a neutral way. Capital income is generally taxed at both corporate and personal levels. However, interest is usually deductible for the CIT (whereas the return to equity is not). In addition, some investors or investments are PIT-exempt, and different types of capital income often face different PIT rates. As a result, interest is often lightly taxed and dividends highly taxed, especially when compared with the taxation applied to capital gains. This gives rise to arbitrage and leads to behavioral changes that erode the capital tax base and create economic distortions, as well as leading to horizontal inequity -referring to the unequal taxation of individuals with similar incomes and assets.
? Consider a lower effective rate on capital income than labor income. Several economies impose a lower overall tax rate on capital compared to labor income. For example, this is found in dual income tax systems where capital income is separated from labor income and taxed at a uniform and relatively low rate (Cnossen, 2000; Sorensen, 2005). Some economies also give targeted relief for the normal return on capital through an allowance at either the corporate level (such as Belgium and Italy) or the personal level (such as Norway).
? Adopt withholding taxes, especially if administration is weak. Taxing capital income at the individual level can be administratively challenging. This provides a rationale for taxing these incomes through withholding at the level of the firm, i.e., the CIT. In countries with weak administrations, withholding taxes on interest and dividends can, to some extent, further circumvent administrative difficulties. Some Latin American countries also impose withholding taxes on capital gains at source.
? Develop more effective taxation of multinational business income. Multinationals use a variety of tax-planning strategies to reduce their global tax liabilities, leading to profit shifting and base erosion. This poses challenges to both advanced and developing economies, and is particularly acute in the latter in light of their greater reliance on CIT receipts. In light of this global challenge, the OECD has begun a two-year action plan on "Base Erosion and Profit Shifting" (BEPS) to address some of these challenges (OECD, 2013). The IMF has work underway, aimed to identify appropriate policy responses, including unilateral and multilateral initiatives (IMF, 2013c).
? Automatically exchange information internationally. This has been announced by the G20 as the new global standard and can enable economies to more effectively impose residence-based capital income taxes by mitigating international tax evasion and avoidance (Keen and Ligthart, 2005). There has been some progress in this regard, led by the OECD"s Global Forum on Transparency and Information Exchange. Unilateral measures are also proceeding, notably the U.S. Foreign Account Tax Compliance Act (FATCA), which envisages penalties for noncompliance. For developing economies, however, this imposes a formidable administrative challenge that might have to compete with more urgent priorities.
54. Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.
? Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martinez Vazquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).
? Recurrent taxes on net wealth generally raise little revenue. Financial wealth is mobile and taxes hard to enforce because they are easily evaded. Few advanced economies today have recurrent taxes on broad measures of net wealth and, where they exist, revenue is typically low. More effective exchange of information across economies could help mitigate evasion and improve the prospect for net wealth taxes to increase revenue yields. If so, they can have some appeal as an instrument to reduce wealth inequality and support equality of opportunity.
? Taxes on inheritances and gifts could play a useful role in limiting inter-generational inequality, which as noted earlier is high in many economies, and strengthening equality of opportunity (Boadway, Chamberlain, and Emmerson, 2010). However, where they exist, rates are generally low, exemptions and special arrangements widespread, and revenue yields small. In the OECD, revenue has been declining over time from 0.35 percent of GDP in 1970 to less than 0.15 percent today. There may be more potential, which is illustrated by, for example, France and Belgium where revenue yields are, respectively, 0.4 and 0.65 percent of GDP.
? Transaction taxes on property and financial assets are administratively appealing, since transactions can often be easily observed and administered. However, these taxes are economically distortive, as they impede otherwise mutually beneficial trades. Transaction taxes on real estate can thus reduce labor mobility and raise unemployment. Financial transaction taxes (FTT) have been much discussed recently, including in the EU where 11 member states have plans to introduce a broad-based FTT. Yet, FTTs can have significant social costs due to cascading effects (tax levied on tax), increasing costs of capital, encouraging avoidance schemes, and potentially impeding socially worthwhile transactions. Moreover, their distributional impact is unclear as the incidence may be shifted onto consumers (Matheson, 2012).
55. Consumption taxes are generally inferior for achieving redistributive objectives compared to income-related taxes and transfers. As shown earlier in the paper, the VAT is generally regressive in advanced economies -at least when assessed against current income rather than current consumption- while it is often found to be progressive in developing economies (Bird and Gendron, 2007). Also excises tend to bear relatively more heavily on people with low incomes in advanced economies (Cnossen, 2005), while this is not generally so in developing economies. Regarding the design of indirect taxes, the following recommendations apply.
? Minimize the use of exemptions or reduced VAT rates. Exemptions or reduced rates on necessities, such as food or energy, are often used to mitigate the regressive impact of the VAT in advanced countries, as expenditure shares of these goods are generally higher for the poor. However, such policies are blunt redistributive instruments, because the rich generally spend more in absolute terms on these goods and thus enjoy significant benefits. Advanced economies usually have access to better instruments to help the poor and vulnerable, such as targeted transfers and progressive PIT systems. For instance, elimination of reduced VAT rates in the United Kingdom, and using the proceeds to increase social benefits, is found to significantly reduce inequality while also boosting revenue (Crawford and others, 2010). In developing countries, exemptions and special VAT rates should also be minimized, as they erode the revenue base and reduce the opportunity to finance redistributive spending. Indeed, even poorly targeted public spending is generally better for the poor than reduced VAT rates (Keen 2014). For instance, in Ethiopia, the net impact of a uniform VAT with the proceeds used for general spending on education and health is found to have a strong progressive impact (Munoz and Cho, 2004). However, where capacity constraints prevent spending programs from reaching the poor, the case for some differentiation in VAT rates, e.g., for basic food items, can be strong.
? Set a sufficiently high VAT registration threshold. Small traders bear a significant compliance burden of the VAT, which they would likely partly pass on to consumers in the form of higher prices (Ebrill and others, 2001). A threshold aims to reduce the compliance cost of VAT for small traders while, at the same time, the revenue foregone is typically not much higher (or even lower) than the cost of collection. A threshold can also strengthen the progressivity of the VAT by reducing the tax on small traders in rural areas where VAT compliance is particularly problematic. In the Dominican Republic, for instance, a VAT threshold has been found to have a strong pro-poor effect (Jenkins, Jenkins, and Kuo, 2006).
? Use specific excises mainly for purposes other than redistribution. Specific excises on cigarettes, alcoholic beverages, gambling, and motor fuels should rather be viewed as corrective tools designed to alter individual behavior in a way that is socially desirable. For example, greater taxation of energy (including through carbon taxation) can help address carbon emissions and various local pollution externalities and generate a significant amount of revenue. While low income groups would nevertheless suffer a decline in real incomes with rising energy prices, mitigating measures targeted to lower-income groups could be introduced to offset any undesired effects on income distribution (Metcalf, 2007; Clements and others, 2013). Special excises on luxury goods, such as yachts, jewelry or perfumes usefully contribute little to achieving equity objectives, raise little revenue, and add to administrative costs, perhaps with the exception of taxes on motor vehicles.
56. Tariffs have unclear implications for inequality. Trade tariffs are responsible for a significant public revenue share in developing economies. In sub-Saharan Africa, for instance, this is about one quarter. Tariff revenue is, however, declining in light of trade liberalization. The distributional impact of tariffs is not quite clear. How the lowering of tariffs will impact inequality will also depend on whether and how countries will be able to recover the lost revenue through other domestic revenue sources (IMF, 2011).
D. Summary
57. Table 1 provides an overview of fiscal policy measures that can help achieve more efficient redistribution in advanced and developing economies.
Fiscal consolidation and inequality
58. The large fiscal consolidations underway in a number of economies have raised concerns about their potential impact on inequality. This is reflected in the increased public support for redistribution since 2008, in particular in countries where the crisis hit the hardest… Equity considerations become even more relevant during periods of consolidation, as they can influence the political sustainability of fiscal adjustment (Cournède and others, 2013; IMF, 2013b).
A. Advanced Economies
59. Fiscal consolidation can affect income inequality through its impact on the distribution of both market and disposable income. Fiscal consolidation typically leads to a short-run reduction in output and employment, which is often associated with a decline in the wage share. This tends to increase market income inequality, given the relatively high share of wages in the incomes of lower-income groups (Jenkins and others, 2011). Increasing unemployment also tends to widen wage inequality, since unskilled wages fall relative to skilled wages as employers hoard skilled labor (Mukoyama and Sahin, 2006). The duration and magnitude of these effects depend on the size of automatic stabilizers, as well as the growth response and its impact on employment. If multipliers are especially high during downturns (Jordà and Taylor, 2013), fiscal contraction can have a strong effect on employment. These effects may be long-lasting if a prolonged period of slow growth has adverse effects on the supply side of the economy (Aghion and others, 2009).
60. The composition and pace of fiscal consolidation influence its impact on inequality. Beyond its effects on market incomes, fiscal consolidation also affects the level and composition of taxes and spending and thus disposable incomes. Income inequality tends to increase the more fiscal adjustment relies on raising regressive taxes and cutbacks in progressive pending. Econometric studies find that fiscal consolidations based on spending cuts worsen inequality by more than revenue-based ones (Ball and others, 2013; Woo and others, 2013; Agnello and Sousa, 2012). Frontloaded adjustments can have especially strong effects on social welfare if they are implemented when unemployment is already high (Blanchard and Leigh, 2013).
61. Evidence from recent fiscal consolidation episodes suggests that a progressive mix of adjustment measures can significantly help offset the adverse effects of adjustment on inequality, though the consolidation may still lead to reduced incomes for the poor in the short term. An analysis of 27 recent adjustment episodes in advanced economies and emerging Europe suggests that, in about half of these economies, market income inequality increased during fiscal consolidations. However, in many cases, the increase was muted by the design of adjustment measures. In almost two-thirds of the economies, fiscal measures led to either a decrease in inequality (a decline in the Gini coefficient for disposable income) or at least partly offset the effect of a worsening of market inequality (Figure 13).
Note: An increase in Gini coefficient indicates an increase in inequality. The Gini coefficient for market income is estimated by Euromod based on post-tax income survey data by Eurostat and simulated figures for taxes, using the Euromod micro-simulation model. *Indicates that data for disposable income refer to 2007–11.
62. A more detailed analysis of fiscal measures suggests that both revenue and spending measures can be designed in ways that reduce their burden on lower-income groups. Among the economies where detailed data are available, simulations of the impact of these measures on disposable income show that five countries (Greece, Latvia, Portugal, Romania, and Spain) implemented progressive measures between 2008 and 2012, with households in the richest quantiles bearing most of the adjustment cost (Figure 14). In other countries, the impact of the adjustment tended to be less redistributive and smaller in size (Italy and the United Kingdom). In contrast, for two economies (Lithuania and Estonia), those in the poorest deciles suffered relatively larger reductions of their income. In Greece, there was also a larger drop in incomes of the poorest ten percent of the population, but the overall effect was progressive, as the second to fourth decile experienced relatively low decreases in their incomes. The simulated effects of the fiscal consolidation measures on the Gini for disposable income are shown in Figure 15. In particular, the difference (represented by the bars in the chart) of the Gini coefficient before and after the implementation of the measures (represented by the triangles and squares, respectively) suggest that fiscal measures have prevented an increase in inequality induced by the market in seven out of nine countries. In particular, the analysis suggests the following:
? Public sector wage reductions were progressive, as public sector employees were mostly skilled and educated workers and a large part of the middle-upper class, and because the cuts were generally structured to have a greater impact on higher income workers;
? Cuts in untargeted benefits were largely progressive, while reductions in means-tested benefits were regressive;
? Proportional reductions in pensions across all beneficiaries proved to be strongly regressive, as pensioners in the lower-middle income groups lost a greater share of their total income. In economies where pension freezes and/or cuts were targeted to high pensions, the overall effect of these measures was progressive;
? Increases in income tax and social contributions proved to be mostly progressive. However, some features of changes in the income tax, such as decreases in the tax-free threshold, reduced the progressivity of income taxation; and
? Increases in VAT rates were regressive, with the relative degree of regressivity depending on the relationship between the VAT structure and consumption patterns of different income groups.
63. This analysis suggests that both expenditure- and revenue-based fiscal adjustments can be designed to mitigate the adverse effects on inequality. While the appropriate pace of fiscal adjustment depends on the state of the economy, the state of public finances, and the extent of market pressures, the progressivity of consolidations depends on the specific design of measures. Governments could consider protecting the most progressive and efficient redistributive spending during fiscal adjustment and improve targeting to minimize the effects of adjustment on inequality. Broadening the scope of spending cuts to reducing subsidies, military spending, and public sector wages can reduce the need for cuts in social transfers. Greater reliance on progressive revenue measures can also avoid the need for large cuts in social transfers, though this room may be limited if taxes are already high (Baldacci, Gupta, and Mulas-Granados, 2012). Progressive tax measures could also be considered, such as reductions in regressive tax expenditures and greater taxation of wealth and property. Finally, expanding active labor markets programs, such as job-search support, targeted wage subsidies, and training programs, can help accelerate the decline in unemployment as economic growth resumes…
Appendix II. Recent Fiscal Consolidations and Income Inequality
The extent and composition of recent fiscal consolidation packages implemented in nine European countries since the global financial crisis differ substantially across economies. The impact of fiscal consolidation on overall disposable income ranged from 1 percent to more than 11 percent, contributing to reductions in living standards of the population. The adopted fiscal measures varied across countries (Appendix Figure 1). Public sector pay reductions were significant in Greece, Latvia, Portugal, Romania, and Spain. Public pension cuts or a freeze in benefits were prevalent in Romania, Portugal, and to a lesser extent, in Spain. Changes in pension indexation were adopted in Estonia. Reductions in means-tested benefits were large in Portugal and the United Kingdom, while reductions in untargeted benefits were sizeable in Lithuania and Latvia. Income tax hikes played a major role in Greece (with an important base-broadening component) and Spain, and increases in worker social insurance contributions played a role in Latvia and Estonia. Increases in VAT rates were adopted in all nine countries…
The overall distributional outcome reflects the composition and design of the consolidation package. Micro-simulation studies indicate that these fiscal adjustments relied on progressive measures. These studies focus exclusively on the impact of spending and tax consolidation measures on household disposable income and consumption, and do not assess the impact of these measures on market income (Callan and others, 2012; Avram and others, 2013; Koutsampelas and Polycarpu, 2013). For a subset of nine countries, studies simulate the impact on disposable income of specific consolidation measures adopted during the period 2008-12 (Appendix Figure 2).
The results suggest that:
? The overall progressivity of the consolidation package in Greece has been driven by progressive public sector pay cuts, pension cuts, and income taxation. Public sector wages were capped, special allowances for civil servants reduced, and the 13th and 14th salaries abolished for high earning workers. The poorest 10 percent of the population were hit relatively harder by the reform of the income tax, which reduced the tax-free threshold from EUR 12,000 to EUR 5,000 in 2011.
? The progressive incidence in Spain was also due to public sector pay cuts and changes in income taxation, although the poorest 10 percent of households were relatively harder hit by the 5 percentage point cumulative VAT increases imposed over 2010 and 2012. The public sector pay cut averaged 5 percent but increased with wage up to 9.7 percent, and was followed by a freeze and the elimination of the 14th month of pay.
? Moderately progressive public sector wage and pension cuts also drove the overall mildly progressive effect of consolidation in Italy, although the scale of the household average income loss was very limited due to a narrow targeting of the implemented measures, which by design only affected a small part of the population. Public sector wages above EUR 90,000 and EUR 150,000 per year were cut by 5 and 10 percent respectively.
? In Portugal, the overall progressive incidence was due to progressive cuts in public wages and pensions, which offset the regressive cuts in means-tested social transfers which negatively affected households in the bottom decile. Public sector pay cuts increased with wage to a maximum of 10 percent, and included the suspension of the 13th and 14th months of pay in 2012. Benefit reductions included a decrease of the amount and tightening of the eligibility conditions for family benefits. The suspension of the 13th and 14th months of pay was reversed in 2013 (after the period under consideration in the analysis).
? The moderately regressive path observed in Lithuania was the result of slightly progressive public sector pay cuts -involving basic wage rates, coefficients, and bonuses- and cuts to untargeted benefits.
? In Romania, the overall incidence was progressive due to public sector pay cuts, real pension reductions for middle-class and rich pensioners, and means-tested benefits.
? Progressive reductions in public sector pay, which decreased the average wage by about 10.5 percent, and non-pension benefits more than offset regressive cuts in public pensions and drove the overall progressivity in Latvia.
? The overall regressive effect observed in Estonia, on the other hand, was driven by a change in the indexation of public pensions, although means-tested social assistance lessened the impact on the incomes of the poorest.
? In the United Kingdom, the overall incidence was progressive, due to higher taxes, especially on the richest 1 percent of the population.
Información de Hemeroteca
– El FMI lanza propuestas para reducir la desigualdad económica (The Wall Street Journal – 13/3/14)
(Por Ian Talley)
Washington.- La principal institución económica del mundo está inmersa en una campaña para revertir la creciente brecha entre los ricos y los pobres, advirtiendo que la creciente desigualdad de ingresos está lastrando el crecimiento económico mundial y atizando la inestabilidad política.
El Fondo Monetario Internacional publicó el jueves un documento de 67 páginas en el que explica cómo pueden usar sus 188 miembros la política fiscal y el gasto público para atajar la creciente disparidad entre los que tienen y los que no. El segundo máximo responsable del fondo, David Lipton, explicará más en detalle el caso en un discurso en el que hablará sobre cómo afronta el tema la organización. Se ha tomado esta decisión después de que la directora gerente del FMI, Christine Lagarde, y algunos de los miembros más poderosos del fondo hayan advertido sobre la amenaza que supone la desigualdad para las perspectivas económicas a largo plazo.
El FMI aboga por subir los impuestos y redistribuir la riqueza, entre otras medidas, para reducir la brecha entre ricos y pobres.
La inestabilidad política que se ha extendido en los últimos años por Egipto, Nigeria, Ucrania y Venezuela pone de manifiesto la importancia de las desigualdades económicas. En todos estos países, la disparidad de ingresos y la mala gestión económica han contribuido al incremento de la inestabilidad. Un problema que se ha visto exacerbado en Estados Unidos y Europa por las crisis financieras.
El FMI confía en que se inicien debates públicos sobre las políticas de protección de los pobres y redistribución de la riqueza. Los empleados del fondo han comenzado a poner en duda teorías económicas tradicionales sobre la desigualdad, como la asunción desde hace cuatro décadas de que la redistribución de la riqueza supone un lastre para el crecimiento.
El FMI asegura que la desigualdad en varios países avanzados, como Estados Unidos, ha vuelto a niveles que no se registraban desde antes de la Gran Depresión de la década de 1930.
El último documento del fondo no prescribe medidas específicas para países específicos. Pero ofrece varias propuestas que probablemente serán muy controvertidas. Principalmente, el FMI señala que muchos países avanzados y en vías de desarrollo pueden reducir la desigualdad aplicando impuestos a la propiedad de una forma más agresiva e impuestos "progresivos" sobre la renta personal que sean más elevados cuanto mayor sea la renta.
Si los países en vías de desarrollo amplían el porcentaje de ingresos que gravan, exigiendo más a los ciudadanos con mayores rentas, los estados podrían gastar más en educación y servicios de salud, dos programas que, entre otros, pueden acabar con la pobreza generacional y que aumentan los ingresos, lo que a su vez alimenta las perspectivas de crecimiento económico a más largo plazo.
Sin embargo, los ingresos son sólo la mitad de la ecuación. Incluso cuando hay ingresos para invertirlos en gasto social, a menudo este gasto está mal estructurado, según el FMI. Una de las mayores cargas económicas que sufren muchos países emergentes son los subsidios a los alimentos y los combustibles.
Los gobiernos de Venezuela, Ucrania y Egipto han dependido mucho de los subsidios estatales y los países están cerca de la quiebra, ya que las arcas estatales no pudieron afrontar los crecientes costes, pese a las presiones políticas para mantenerlos.
El FMI agregó que los países en vías de desarrollo deberían unificar y ampliar sus programas de asistencia social, dirigir mejor sus subvenciones hacia los más pobres y vincular las transferencias de dinero estatal a los más vulnerables a servicios de salud y educación.
– Las cuatro claves del FMI para frenar la desaparición de la clase media (El Economista – 13/3/14)
Desde la crisis financiera de 2008 y la Gran Recesión, el incremento de la desigualdad y la brecha social en economías emergentes y avanzadas se ha convertido en un importante problema. Es por ello que el Fondo Monetario Internacional (FMI) afirma en un informe que para respaldar un crecimiento económico sostenible, "la redistribución del ingreso debe basarse en instrumentos fiscales que permitan alcanzar los objetivos de distribución con el menor costo posible en términos de eficiencia económica".
La creciente desigualdad observada en los últimos años ha agudizado la presión para usar la política fiscal como herramienta de redistribución del ingreso. Aunque a fin de cuentas es a cada gobierno nacional al que le toca decidir cuánta redistribución debe realizar exactamente el Estado, la concepción de las políticas mismas ejerce una influencia crítica en los efectos que tendrán en la eficiencia y el crecimiento.
El nuevo estudio
La concepción de políticas fiscales redistributivas eficientes y propicias para el crecimiento es el tema que aborda un nuevo estudio sobre la política fiscal y la desigualdad del ingreso elaborado por el personal técnico del FMI. Este estudio se suma a los anteriores trabajos realizados por el personal técnico del FMI para analizar los efectos de la desigualdad sobre el crecimiento. El mes pasado, el Departamento de Estudios del FMI publicó otro documento sobre este tema.
De acuerdo con la institución, con sede en Washington, la concepción de una política fiscal redistributiva eficiente abarca cuatro dimensiones clave:
– Primero, una política fiscal redistributiva debe ser coherente con los objetivos de la política macroeconómica. El nivel de gasto en redistribución, por ejemplo, debería estar acorde con la estabilidad macroeconómica; además, es necesario comparar los beneficios de un gasto adicional en redistribución con los beneficios de un gasto adicional en otros ámbitos prioritarios, como la infraestructura.
– Segundo, los impuestos y los gastos deberían evaluarse conjuntamente. Por ejemplo, un aumento de la recaudación del impuesto al valor agregado (IVA) utilizado para financiar más gastos en enseñanza primaria podría resultar progresivo en términos netos.
– Tercero, las políticas de redistribución deben estar concebidas de manera que equilibren los objetivos de redistribución y de eficiencia. Algunas políticas redistributivas, como las que fortalecen el capital humano, de hecho pueden promover la eficiencia. Pero en otros casos quizás haya que sacrificar algo.
– Cuarto, las políticas deben diseñarse teniendo en cuenta la capacidad administrativa.
– La desigualdad, el nuevo caballo de batalla del FMI (El Economista – 15/3/14)
(Por Alfonso Fernández)
El Fondo Monetario Internacional (FMI) ha situado su nuevo caballo de batalla en la lucha contra la creciente desigualdad económica, tendencia que ve generalizada tanto en avanzados como emergentes y que ya ha advertido que puede hacer descarrilar la tímida recuperación en marcha.
El organismo dirigido por Christine Lagarde subrayó esta semana en un amplio estudio sobre desigualdad y política fiscal que "en las últimas tres décadas, la desigualdad ha crecido en casi todos los países".
De hecho, Lagarde ha llamado a esta tendencia uno de los "mayores flagelos" económicos de nuestro tiempo en repetidos discursos.
Por ello, y para hacer frente a la creciente desigualdad global, el FMI recomienda tratar con sumo cuidado las herramientas de política fiscal disponibles.
Esta tendencia, los cada vez más dispares rendimientos de los segmentos más ricos y menos ricos de la población, ha potenciado las exigencias de la ciudadanía por una mayor redistribución.
"Especialmente", explicó David Lipton, número dos del Fondo en una conferencia en Washington para presentar el informe, "en el contexto de tensiones sociales asociadas a la consolidación fiscal aplicada tras el estallido de la crisis financiera de 2008".
Como caso paradigmático el Fondo ha puesto a EEUU, donde la cuota del total de ingresos capturada por el 10 % más rico de la población ha pasado del 30 % en 1980 al 48 % en 2012, aunque observa una trayectoria similar en casi todos los países.
Para los avanzados, el FMI recomienda elevar la edad de jubilación, con "el objetivo de mejorar la estabilidad financiera de los planes de pensiones sin reducir beneficios", y reducir exenciones regresivas como las desgravaciones por propiedad de inmuebles.
En Europa, donde se han impuesto duros planes de ajuste para hacer frente a la crisis en las finanzas públicas, el Fondo destaca las políticas progresivas aplicadas en países como España, Grecia, Letonia, Portugal y Rumanía entre 2008 y 2012, donde los estratos mejor situados soportaron el grueso del ajuste.
En el lado opuesto, sitúa a Reino Unido o Italia, cuyas políticas han sido menos equitativas.
Asimismo, Lipton advirtió de los riesgos de políticas redistributivas erróneas y mal ajustadas en los países emergentes.
"La redistribución puede apoyar el crecimiento porque reduce la desigualdad, pero puede ser muy costosa si está mal diseñada", afirmó al apuntar como ejemplo los ineficientes subsidios energéticos en países en desarrollo.
El organismo se ha lanzado en una cruzada contra este tipo de subsidios, que favorecen de manera desproporcionada a aquellos con mayores ingresos.
Además, el Fondo, que había hasta ahora mantenido una cautelosa distancia respecto a la desigualdad tanto de ingreso como de riqueza dentro del crecimiento general, ha empezado a reconocer las complicadas consecuencias sociales que puede tener al vincularlo a las protestas que se han visto en los últimos años en países como Turquía, Brasil, Venezuela o Egipto.
"En muchos países en desarrollo, el 40 % más pobre recibe menos del 40 % del total de beneficios sociales, lo que contribuye a la desigualdad de oportunidades y una baja movilidad intergeneracional", explicó Lipton.
No obstante, y pese a valorar el reciente énfasis en la cuestión por parte de los técnicos del Fondo, organizaciones como Oxfam piden que salga del ámbito académico y empiece a aplicar estas recetas en el día a día de la institución.
Críticas al FMI
"Esperemos que esto signifique un cambio a largo plazo en las recomendaciones de política del FMI a los países: invertir en educación y sanidad y políticas fiscales más progresivas", dijo a Efe Nicolás Mombrial, portavoz de Oxfam en Washington.
Asimismo, apuntó a un elemento ausente en el análisis de la institución: "es preocupante que no identifique la evasión fiscal de las empresas como un generador de desigualdad (…) Las compañías deben contribuir con su parte".
– Concepción sólida de las políticas: La manera eficiente de reducir la desigualdad (Boletín del FMI – 13 de marzo de 2014)
La desigualdad va en aumento en muchas regiones del mundo
Las políticas fiscales pueden ayudar a los países a reducir la desigualdad
Se pueden diseñar políticas redistributivas teniendo en mente la eficiencia
Para respaldar un crecimiento económico sostenible, la redistribución del ingreso debe basarse en instrumentos fiscales que permitan alcanzar los objetivos de distribución con el menor costo posible en términos de eficiencia económica.
La creciente desigualdad observada en los últimos años ha agudizado la presión para usar la política fiscal como herramienta de redistribución del ingreso. Aunque a fin de cuentas es a cada gobierno nacional al que le toca decidir cuánta redistribución debe realizar exactamente el Estado, la concepción de las políticas mismas ejerce una influencia crítica en los efectos que tendrán en la eficiencia y el crecimiento.
La concepción de políticas fiscales redistributivas eficientes y propicias para el crecimiento es el tema que aborda un nuevo estudio sobre la política fiscal y la desigualdad del ingreso elaborado por el personal técnico del FMI. Este estudio se suma a los anteriores trabajos realizados por el personal técnico del FMI para analizar los efectos de la desigualdad sobre el crecimiento. El mes pasado, el Departamento de Estudios del FMI publicó otro documento sobre este tema.
Analizar el efecto de las políticas de tributación y gasto en la eficiencia y la manera en que afectan a las metas de distribución es una tarea que forma parte desde hace tiempo del asesoramiento en materia de políticas brindado por el FMI a los países miembros en el contexto de la asistencia técnica. Una inquietud común de los programas de préstamo del FMI es cómo diseñar medidas de política fiscal que sean coherentes con los objetivos de distribución de las autoridades. El estudio reúne la vasta experiencia del FMI en estos ámbitos.
"La concepción es importante para la redistribución fiscal", señala David Lipton, Primer Subdirector Gerente del FMI. "Si la redistribución está mal concebida, o si va demasiado lejos, puede provocar distorsiones", precisó Lipton, "pero algunas políticas fiscales redistributivas -como las que realzan el capital humano de los hogares de bajo ingreso- de hecho pueden ayudar a mejorar la eficiencia y respaldar el crecimiento".
Tendencias de la desigualdad
"A lo largo de las tres últimas décadas, la desigualdad ha aumentado en la mayor parte de los países. Si bien el nivel de desigualdad se ha reducido en América Latina y África subsahariana en los últimos tiempos, resultan sorprendentes las persistentes diferencias entre una región y otra: América Latina sigue teniendo los índices más altos de desigualdad, y las economías avanzadas, los más bajos".
Un aspecto que ha captado la atención últimamente es la creciente proporción de la población que percibe el máximo de los ingresos. El estudio sugiere que la tendencia no parece ser uniforme a nivel mundial. En algunas economías, como Estados Unidos y Sudáfrica, los ingresos del 1% más acaudalado han aumentado vertiginosamente en las últimas décadas, pero en Europa continental y Japón se han mantenido mayormente sin cambios. Hay opiniones encontradas sobre las causas de este fenómeno. Algunos observadores destacan el impacto de la globalización y las nuevas tecnologías; otros, las medidas adoptadas, como los recortes de las tasas impositivas; y otros, el comportamiento rentista de los ejecutivos.
La experiencia de los países con la política redistributiva
En el mundo entero, los países han recurrido a distintos tipos de políticas redistributivas para hacer frente a la desigualdad. De acuerdo con el estudio elaborado por el personal técnico del FMI, las economías avanzadas, en promedio, han logrado reducir la desigualdad en aproximadamente una tercera parte, gracias a una combinación de transferencias sociales (por ejemplo, seguro de desempleo y prestaciones de jubilación) e impuestos redistributivos (por ejemplo, impuestos progresivos sobre la renta). Otras prestaciones, como el gasto público en salud, educación y vivienda, ayudan a reducir aún más la desigualdad.
También se ha observado que una combinación adecuada de medidas puede ayudar a compensar los efectos negativos del ajuste fiscal sobre la desigualdad. En casi la mitad de una muestra de 27 economías avanzadas y emergentes de Europa que emprendieron ajustes fiscales en 2007–12, la desigualdad aumentó. Sin embargo, en muchas de estas economías, la labor de concepción de estas medidas permitió atenuar sus efectos. En dos terceras partes de estas economías, las medidas fiscales permitieron reducir la desigualdad o, por lo menos, compensar el efecto de una desigualdad cada vez mayor.
En los países en desarrollo, la política fiscal ha desempeñado un papel más modesto. Los ingresos tributarios son mucho menores (como proporción del producto nacional) en las economías en desarrollo, con la excepción de las economías emergentes de Europa. En términos de la composición, los impuestos al consumo representan una proporción mucho mayor y tienden a ser menos redistributivos que los impuestos sobre la renta. Análogamente, del lado del gasto, el gasto redistributivo -particularmente en protección social- es mucho menor que en las economías avanzadas.
El estudio determinó también que en las economías en desarrollo una proporción mayor del gasto social beneficia a grupos de ingreso más alto. Con la excepción de las economías emergentes de Europa, el 40% más pobre de la población se beneficia de menos de 20% del gasto en protección social. La cobertura de las prestaciones sociales, en términos del porcentaje de los hogares pobres que las reciben, también es baja, excepto en las economías emergentes de Europa y América Latina.
La situación es parecida en lo que respecta al gasto en educación y salud. En muchas economías en desarrollo, el 40% más pobre recibe menos de 40% del total de las prestaciones. Esto se debe a que los pobres suelen carecer de acceso a estos servicios, lo cual contribuye a la desigualdad de oportunidades y atenta contra la movilidad intergeneracional.
Opciones para lograr una redistribución eficiente
De acuerdo con el estudio, la concepción de una política fiscal redistributiva eficiente abarca cuatro dimensiones clave:
• Primero, una política fiscal redistributiva debe ser coherente con los objetivos de la política macroeconómica. El nivel de gasto en redistribución, por ejemplo, debería estar acorde con la estabilidad macroeconómica; además, es necesario comparar los beneficios de un gasto adicional en redistribución con los beneficios de un gasto adicional en otros ámbitos prioritarios, como la infraestructura.
• Segundo, los impuestos y los gastos deberían evaluarse conjuntamente. Por ejemplo, un aumento de la recaudación del impuesto al valor agregado (IVA) utilizado para financiar más gastos en enseñanza primaria podría resultar progresivo en términos netos.
• Tercero, las políticas de redistribución deben estar concebidas de manera que equilibren los objetivos de redistribución y de eficiencia. Algunas políticas redistributivas, como las que fortalecen el capital humano, de hecho pueden promover la eficiencia. Pero en otros casos quizás haya que sacrificar algo.
• Cuarto, las políticas deben diseñarse teniendo en cuenta la capacidad administrativa.
Partiendo de estos principios, se perfila una serie de opciones de reforma que podría lograr la redistribución con eficiencia. Del lado impositivo, algunos países podrían plantearse la posibilidad de imprimir más progresividad al régimen de tributación de la renta. Por ejemplo, en las economías con una tasa plana quizás haya margen para que la tributación de los estratos más altos sea más progresiva. Algunas economías avanzadas también podrían plantearse eximir a los asalariados con baja remuneración del impuesto sobre la renta o de los aportes sociales.
En términos generales, los impuestos al consumo (como el IVA) no son tan eficientes como los impuestos directos para lograr las metas de redistribución. Como los ricos suelen gastar más, en términos absolutos, en artículos de primera necesidad como los alimentos o la energía, se benefician considerablemente cuando esos artículos son objeto de exenciones o tasas más bajas. En estos casos, algunos gobiernos podrían plantearse reducir al mínimo las exenciones y las tasas especiales para incrementar el ingreso de manera eficiente y financiar así con más facilidad el gasto a favor de los pobres. Cuando los programas no puedan llegar a los pobres debido a limitaciones de capacidad, se justifica plenamente hacer alguna diferenciación entre las tasas del IVA (por ejemplo, para alimentos básicos).
Del lado del gasto, los gobiernos podrían proponerse mejorar el acceso a la enseñanza y los servicios de atención de la salud. Según el estudio del FMI, mejorar el acceso de las familias de bajo ingreso a la educación constituye una herramienta eficiente para promover la igualdad de oportunidades y, a largo plazo, también puede reducir la desigualdad del ingreso.
Con el mismo ánimo, ampliar el acceso de los pobres a los servicios de atención de la salud en las economías en desarrollo también puede contribuir a promover la igualdad de oportunidades de manera eficiente. En las economías avanzadas, mantener el acceso de los pobres a los servicios de salud durante períodos de restricción del gasto público es también congruente con una redistribución eficiente.
Estas políticas pueden beneficiar a todas las partes interesadas y, a la vez, mejorar tanto la igualdad como la eficiencia.
– Fiscal Policy and Income Inequality
(by David Lipton)
First Deputy Managing Director, IMF
At The Peterson Institute for International Economics
Washington, D.C., March 13, 2014
Thank you for providing me the opportunity to present the key findings of a new IMF study on fiscal policy and income inequality.
Income inequality has been rising in many parts of the world in recent decades. This, and the social tensions associated with fiscal consolidation that many have faced in part stemming from the global financial crisis, have put the distributional impact of governments" tax and spending policies at the heart of the public debate in many countries. Of course, the question of just how much redistribution the state should do is, at its core, a political one that economic analysis cannot answer. But I think that we can all agree that whatever degree of redistribution governments choose, it should be done with fiscal instruments that achieve their distributional objectives at a minimum cost to economic efficiency.
The design of these growth-friendly, efficient redistributive fiscal policies is the focus of my presentation today.
Some may be surprised that the Fund is engaging in this debate on the design of redistributive policies. The truth of the matter is that we have been at this for a long time. Assessing the effect of tax and expenditure policies on efficiency, and any potential tradeoffs with distributional goals, has long been an important component of the IMF"s policy advice. Furthermore, the design of Fund-supported programs is inevitably influenced by the authorities" distributional objectives. Whenever we discuss social safety net programs, or the level of health and education expenditures, and how to generate the revenues or finance to sustain them, subjects we routinely address, we are discussing redistribution policy.
Our record for protecting the poor in the design of Fund-supported programs has a longstanding history, going back to the Camdessus era in the 1980s.
So, this paper should thus be seen as the Fund"s advice to its membership, based on our extensive experience. Of course, one reason why we are discussing this issue today is that the interest in redistribution as reflected in public surveys and our discussions with our members is higher than in the past. Our members want to explore with us how they can pursue distributive policies in an efficient manner.
The key message that I want to convey today is that when it comes to fiscal redistribution, design matters. This is consistent with a recent IMF staff study by Ostry et al, which finds that, on average, inequality is associated with lower growth. Thus fiscal redistribution can help support growth because it reduces inequality. What we see is a diversity of experience across countries with redistributive policies. Some redistributive fiscal policies can help improve efficiency and support growth, such as those that enhance the human capital of low-income households. Let me be clear, redistributive policies can generate a tradeoff between equality and efficiency, and if misconceived, this tradeoff can be very costly. I will cite examples of this problem later on. But as I said, design matters, and smart design can help to minimize the adverse effects of redistributive policies on incentives to work, save, and invest.
My presentation today will cover three broad topics, including trends in inequality, the experience of countries in using redistributive policy, and options for achieving more efficient redistribution.
Let us first move to the discussion of trends in inequality. This figure presents the trends in the average Gini coefficient for disposable income. Gini coefficient ranges from 0 to 1, with larger values representing higher inequality. Disposable income is market income after income and wealth taxes and cash transfers. Over the last three decades, the Gini coefficient has increased in most countries, indicating an increase in inequality. In Latin America and sub-Saharan Africa, however, there has been a declining level of inequality more recently. What is most striking in the figure, however, are the persistent differences across regions, with Latin America having the highest inequality and the advanced economies having the lowest.
More recently, there has been great attention to the rising share of top income earners. The trends across countries appear mixed. In some economies, such as the United States and South Africa, the share of the top one-percent has increased dramatically in recent decades, but not so in continental Europe and Japan, where it has been largely unchanged. There are differing views of the causes of the rising share of the top one percent. Some emphasize the impact of globalization and new technologies, while others highlight policy choices, such as reductions in tax rates, and others the rent-seeking behavior of executives.
If we compare the distribution of income with that of wealth, we can see that wealth is much more unequally distributed, as indicated by the higher Gini coefficients. In a similar vein, a recent Oxfam study found that that the richest 85 people in the world own the same amount of wealth as the bottom half of the world"s population. Both the high degree of inequality of wealth, and the increased share of the top one percent, have fueled the recent debate on income and wealth taxation.
Let us now turn to country experience with different instruments for fiscal redistribution. We will start with the advanced economies, where countries are already doing a substantial amount of redistribution. The average market income Gini, i.e., in the absence of any fiscal redistribution, is 0.43. Redistributive transfers and taxes reduce inequality by about a third, with about two-thirds of this coming from transfers.
The previous slide does not include the impact of in-kind benefits, such as public spending on health, education, and housing. In the countries selected here, it is estimated that in-kind transfers further reduce the market Gini, on average, by more than 10 percent. Thus, we can conclude that based on both direct and in-kind benefits, fiscal policy has played a major role in reducing inequality in advanced economies, although its extent varies across countries.
So what about developing economies? Developing economies here include both emerging and low-income countries. It appears that fiscal policy has played a much more modest role there. Let"s first look at the tax side. The levels of tax revenues are significantly lower in developing economies, with the exception of emerging Europe. In terms of composition, indirect taxes, like the VAT, account for a much larger share, which tend to be less progressive than direct taxes such as the income tax. On the expenditure side, again, levels of redistributive expenditures are much lower, particularly when it comes to social protection.
A lot of the social spending in developing economies is not well designed and targeted and actually increases inequality. With the exception of emerging Europe, the poorest 40 percent of the population receive less than 20 percent of the benefits of social protection spending. The coverage of social benefits, in terms of the percentage of poor households that receive benefits, is also low, except in emerging Europe and Latin America.
In this context, it is also important to note that many developing countries use energy subsidies as a form of social assistance. But as we underscored in the work we presented at the Peterson Institute last year, these subsidies disproportionately benefit upper-income groups.
Education and health spending in developing economies is also not well targeted and exacerbates inequality. In many developing economies, for example, the poorest 40 percent receive less than 40 percent of the total benefits, which contributes to inequality of opportunity and low intergenerational mobility. One reason for this is that the poor often lack access to these services, reflecting the fact that many of them live in poor rural areas while services are concentrated in urban areas.
This discussion of the redistributive effect of fiscal policy in advanced and developing economies has important implications for the design of fiscal consolidation packages. As shown in our paper, a number of economies have adopted progressive adjustment measures during their recent fiscal consolidations. As a result, the burden of these adjustment measures on the bottom 20 percent of the population was lower than that of upper income groups. For example, in Greece, Latvia, Portugal, Romania, and Spain, cuts in public sector pay had a smaller effect on civil servants toward the bottom of the pay-scale. In Spain and the United Kingdom, increases in income taxation were born more heavily by upper-income groups.
Let us now turn to options for designing fiscal redistribution in an efficient manner. We see four key considerations in designing efficient redistributive fiscal policy:
First, redistributive fiscal policy should be consistent with macroeconomic policy objectives. The level of spending on redistribution, for example, should be consistent with macroeconomic stability. In addition, the benefits of additional spending on redistribution should be compared with the benefits of raising spending in other priority areas, such as infrastructure.
Second, taxes and expenditures should be evaluated jointly. For example, an increase in VAT revenues, used to finance higher spending in secondary education, could -on net- be progressive.
Third, the design of redistribution policies should account for both redistributive and efficiency objectives. Some redistributive policies may in fact enhance efficiency, such as those that strengthen human capital. But with others there may be the need to manage a tradeoff.
And fourth, design should take into account administrative capacity.
Based on these principles, we examine a range of options for achieving redistribution efficiently. The paper provides an extensive discussion of instruments. In the interest of time, I will focus on a few of the most important options discussed in the paper. These measures could be implemented as part of long-term fiscal reforms aimed at achieving redistributive objectives more efficiently. They could also be integrated into the design of fiscal consolidation strategies that aim to help governments achieve redistributive goals at a lower fiscal cost.
The primary contribution of taxation to reducing income inequality is through its financing of redistributive spending measures in a way that it does not harm growth. Nevertheless, taxes can also have a direct effect on redistribution. This is particularly the case for income taxes.
To start, countries could consider making their income tax systems more progressive. For example, in economies where a flat rate is used, there may be scope for more tax progression at the top. Since the mid-1990s, 27 countries -especially in Central and Eastern Europe and Central Asia- have introduced flat tax systems, usually with a low marginal rate. The top personal income tax rate must, however, be set with care. If it is too high, taxpayers will find ways to avoid or evade the tax and a higher rate may no longer raise extra revenue. In many developing economies, both fairness and equity could be enhanced by bringing more informal operators into the personal income tax.
There is also scope to more fully utilize property taxes, both as a source of revenue and as an efficient redistributive instrument. This applies also to developing economies, where only Colombia, Namibia, Russia, South Africa, and Uruguay collect more than 1 percent of GDP through recurrent property taxes.
Indirect taxes, including the VAT, are generally less effective in achieving redistributive goals than direct taxes. On the VAT, the recommendation is thus to minimize exemptions and special rates, in order to efficiently raise revenues to help finance pro-poor spending. For instance, elimination of reduced VAT rates in the United Kingdom, and using the proceeds to increase social benefits, would significantly reduce inequality. Earlier work at the IMF has shown that in Ethiopia, the net impact of a uniform VAT, with the proceeds used for general spending on education and health, would have a strong progressive impact. However, where capacity constraints prevent spending programs from reaching the poor, there can be a case for some differentiation in VAT rates, for example for basic foods that are a large part of the spending of the poor.
On the expenditure side, I would like to start first with education. Improving the access of low-income families to education is an efficient tool for boosting equality of opportunity, and over the long run, it can also reduce income inequality. In advanced economies, this entails increasing the access to tertiary education for low-income families, including through scholarships and loans. For developing economies, a strengthening of access to quality secondary education is also required, for example, by eliminating tuition fees.
Along the same lines, improving the access of the poor to health care services in developing economies can provide a head start to greater opportunity and do so in an efficient manner. Some countries, including China, Ghana, India, and Mexico, have taken important steps toward universal coverage in recent years. In advanced economies, maintaining the access of the poor to health services during periods of expenditure constraint is also consistent with efficient redistribution.
To make social transfers more efficient in advanced economies, there could be greater use of active labor market programs and in-work benefits for social benefit recipients. This would, for example, require beneficiaries to participate in active labor market programs, such as job training, as a condition for receiving benefits, as done in Belgium, the Slovak Republic, and Slovenia.
The second reform measure that I will focus on is to expand conditional cash transfer programs in developing economies. These programs make benefits conditional on the attendance of children at health clinics and at school. Means-testing helps keep the fiscal cost low. This policy can help boost both equality of opportunity and income inequality. For instance, the direct impact of such transfers in Brazil and Mexico accounts for one-fifth of the reduction in inequality between 1995 and 2004 in these two countries. A strengthening of administrative capacity, however, is required for implementing these programs in many developing economies.
Pensions have played an important role in reducing income inequality. To improve the sustainability of pension systems and maintain their role in protecting the elderly poor, many economies could consider increasing effective retirement ages. This would need to be accompanied by measures to ensure that lower-income workers are fully protected, as needed, with disability pensions and social assistance if they are unable to work. In developing economies, to ensure wider coverage of pensions at a reasonable fiscal cost, a viable option is to expand noncontributory, means-tested social pensions. Social pensions in some form exist in both emerging and low-income developing countries, including in Chile, Ethiopia, India, and South Africa.
Many countries have been grappling with the twin challenge of putting their pension systems on sound financial footing while safeguarding or expanding their important role in alleviating old-age poverty. I would like to take this opportunity to bring your attention to a new IMF book, "Equitable and Sustainable Pensions: Challenges and Experience," which we are also launching today. The book examines the complex equity issues involved in designing pension systems, including generational and gender equity. It also presents 12 country cases studies to help draw lessons for designing sustainable and equitable pension systems.
Let me end where I started. Many advanced and developing economies are facing the challenge of rising inequality. Fiscal policy has played a major role in reducing inequality in the past and is the primary tool available for governments to affect income distribution. Whether these policies help, or hurt growth, is all a matter of design. And the details matter. Thus, debates on the impact of the government"s redistributive policies must go far beyond a mere discussion of tax and spending ratios. In the end, it is design that matters. And on this, the good news is that quite a lot is now known about how governments can best address the challenges of squaring their equity and efficiency concerns, a task on which the Fund stands ready to help.
Thank you.
Política fiscal y desigualdad del ingreso
– Concepción sólida de las políticas: La manera eficiente de reducir la desigualdad (FMI – 13/3/14)
Boletín del FMI
13 de marzo de 2014
¦La desigualdad va en aumento en muchas regiones del mundo
¦Las políticas fiscales pueden ayudar a los países a reducir la desigualdad
¦Se pueden diseñar políticas redistributivas teniendo en mente la eficiencia
Para respaldar un crecimiento económico sostenible, la redistribución del ingreso debe basarse en instrumentos fiscales que permitan alcanzar los objetivos de distribución con el menor costo posible en términos de eficiencia económica.
La creciente desigualdad observada en los últimos años ha agudizado la presión para usar la política fiscal como herramienta de redistribución del ingreso. Aunque a fin de cuentas es a cada gobierno nacional al que le toca decidir cuánta redistribución debe realizar exactamente el Estado, la concepción de las políticas mismas ejerce una influencia crítica en los efectos que tendrán en la eficiencia y el crecimiento.
La concepción de políticas fiscales redistributivas eficientes y propicias para el crecimiento es el tema que aborda un nuevo estudio sobre la política fiscal y la desigualdad del ingreso elaborado por el personal técnico del FMI. Este estudio se suma a los anteriores trabajos realizados por el personal técnico del FMI para analizar los efectos de la desigualdad sobre el crecimiento. El mes pasado, el Departamento de Estudios del FMI publicó otro documento sobre este tema.
Analizar el efecto de las políticas de tributación y gasto en la eficiencia y la manera en que afectan a las metas de distribución es una tarea que forma parte desde hace tiempo del asesoramiento en materia de políticas brindado por el FMI a los países miembros en el contexto de la asistencia técnica. Una inquietud común de los programas de préstamo del FMI es cómo diseñar medidas de política fiscal que sean coherentes con los objetivos de distribución de las autoridades. El estudio reúne la vasta experiencia del FMI en estos ámbitos.
"La concepción es importante para la redistribución fiscal", señala David Lipton, Primer Subdirector Gerente del FMI. "Si la redistribución está mal concebida, o si va demasiado lejos, puede provocar distorsiones", precisó Lipton, "pero algunas políticas fiscales redistributivas -como las que realzan el capital humano de los hogares de bajo ingreso- de hecho pueden ayudar a mejorar la eficiencia y respaldar el crecimiento".
Tendencias de la desigualdad
"A lo largo de las tres últimas décadas, la desigualdad ha aumentado en la mayor parte de los países. Si bien el nivel de desigualdad se ha reducido en América Latina y África subsahariana en los últimos tiempos, resultan sorprendentes las persistentes diferencias entre una región y otra: América Latina sigue teniendo los índices más altos de desigualdad, y las economías avanzadas, los más bajos".
Un aspecto que ha captado la atención últimamente es la creciente proporción de la población que percibe el máximo de los ingresos. El estudio sugiere que la tendencia no parece ser uniforme a nivel mundial. En algunas economías, como Estados Unidos y Sudáfrica, los ingresos del 1% más acaudalado han aumentado vertiginosamente en las últimas décadas, pero en Europa continental y Japón se han mantenido mayormente sin cambios. Hay opiniones encontradas sobre las causas de este fenómeno. Algunos observadores destacan el impacto de la globalización y las nuevas tecnologías; otros, las medidas adoptadas, como los recortes de las tasas impositivas; y otros, el comportamiento rentista de los ejecutivos.
La experiencia de los países con la política redistributiva
En el mundo entero, los países han recurrido a distintos tipos de políticas redistributivas para hacer frente a la desigualdad. De acuerdo con el estudio elaborado por el personal técnico del FMI, las economías avanzadas, en promedio, han logrado reducir la desigualdad en aproximadamente una tercera parte, gracias a una combinación de transferencias sociales (por ejemplo, seguro de desempleo y prestaciones de jubilación) e impuestos redistributivos (por ejemplo, impuestos progresivos sobre la renta). Otras prestaciones, como el gasto público en salud, educación y vivienda, ayudan a reducir aún más la desigualdad.
También se ha observado que una combinación adecuada de medidas puede ayudar a compensar los efectos negativos del ajuste fiscal sobre la desigualdad. En casi la mitad de una muestra de 27 economías avanzadas y emergentes de Europa que emprendieron ajustes fiscales en 2007-12, la desigualdad aumentó. Sin embargo, en muchas de estas economías, la labor de concepción de estas medidas permitió atenuar sus efectos. En dos terceras partes de estas economías, las medidas fiscales permitieron reducir la desigualdad o, por lo menos, compensar el efecto de una desigualdad cada vez mayor.
En los países en desarrollo, la política fiscal ha desempeñado un papel más modesto. Los ingresos tributarios son mucho menores (como proporción del producto nacional) en las economías en desarrollo, con la excepción de las economías emergentes de Europa. En términos de la composición, los impuestos al consumo representan una proporción mucho mayor y tienden a ser menos redistributivos que los impuestos sobre la renta. Análogamente, del lado del gasto, el gasto redistributivo -particularmente en protección social- es mucho menor que en las economías avanzadas.
El estudio determinó también que en las economías en desarrollo una proporción mayor del gasto social beneficia a grupos de ingreso más alto. Con la excepción de las economías emergentes de Europa, el 40% más pobre de la población se beneficia de menos de 20% del gasto en protección social. La cobertura de las prestaciones sociales, en términos del porcentaje de los hogares pobres que las reciben, también es baja, excepto en las economías emergentes de Europa y América Latina.
La situación es parecida en lo que respecta al gasto en educación y salud. En muchas economías en desarrollo, el 40% más pobre recibe menos de 40% del total de las prestaciones. Esto se debe a que los pobres suelen carecer de acceso a estos servicios, lo cual contribuye a la desigualdad de oportunidades y atenta contra la movilidad intergeneracional.
Opciones para lograr una redistribución eficiente
De acuerdo con el estudio, la concepción de una política fiscal redistributiva eficiente abarca cuatro dimensiones clave:
• Primero, una política fiscal redistributiva debe ser coherente con los objetivos de la política macroeconómica. El nivel de gasto en redistribución, por ejemplo, debería estar acorde con la estabilidad macroeconómica; además, es necesario comparar los beneficios de un gasto adicional en redistribución con los beneficios de un gasto adicional en otros ámbitos prioritarios, como la infraestructura.
• Segundo, los impuestos y los gastos deberían evaluarse conjuntamente. Por ejemplo, un aumento de la recaudación del impuesto al valor agregado (IVA) utilizado para financiar más gastos en enseñanza primaria podría resultar progresivo en términos netos.
• Tercero, las políticas de redistribución deben estar concebidas de manera que equilibren los objetivos de redistribución y de eficiencia. Algunas políticas redistributivas, como las que fortalecen el capital humano, de hecho pueden promover la eficiencia. Pero en otros casos quizás haya que sacrificar algo.
• Cuarto, las políticas deben diseñarse teniendo en cuenta la capacidad administrativa.
Partiendo de estos principios, se perfila una serie de opciones de reforma que podría lograr la redistribución con eficiencia. Del lado impositivo, algunos países podrían plantearse la posibilidad de imprimir más progresividad al régimen de tributación de la renta. Por ejemplo, en las economías con una tasa plana quizás haya margen para que la tributación de los estratos más altos sea más progresiva. Algunas economías avanzadas también podrían plantearse eximir a los asalariados con baja remuneración del impuesto sobre la renta o de los aportes sociales.
En términos generales, los impuestos al consumo (como el IVA) no son tan eficientes como los impuestos directos para lograr las metas de redistribución. Como los ricos suelen gastar más, en términos absolutos, en artículos de primera necesidad como los alimentos o la energía, se benefician considerablemente cuando esos artículos son objeto de exenciones o tasas más bajas. En estos casos, algunos gobiernos podrían plantearse reducir al mínimo las exenciones y las tasas especiales para incrementar el ingreso de manera eficiente y financiar así con más facilidad el gasto a favor de los pobres. Cuando los programas no puedan llegar a los pobres debido a limitaciones de capacidad, se justifica plenamente hacer alguna diferenciación entre las tasas del IVA (por ejemplo, para alimentos básicos).
Del lado del gasto, los gobiernos podrían proponerse mejorar el acceso a la enseñanza y los servicios de atención de la salud. Según el estudio del FMI, mejorar el acceso de las familias de bajo ingreso a la educación constituye una herramienta eficiente para promover la igualdad de oportunidades y, a largo plazo, también puede reducir la desigualdad del ingreso.
Con el mismo ánimo, ampliar el acceso de los pobres a los servicios de atención de la salud en las economías en desarrollo también puede contribuir a promover la igualdad de oportunidades de manera eficiente. En las economías avanzadas, mantener el acceso de los pobres a los servicios de salud durante períodos de restricción del gasto público es también congruente con una redistribución eficiente.
Estas políticas pueden beneficiar a todas las partes interesadas y, a la vez, mejorar tanto la igualdad como la eficiencia.
Society at a Glance 2014 – OECD Social Indicators – The crisis and its aftermath – March 2014
Executive summary
More than five years on from the financial crisis, high rates of joblessness and income losses are worsening social conditions in many OECD countries. The capacity of governments to meet these challenges is constrained by fiscal consolidation. However, cuts in social spending risk adding to the hardship of the most vulnerable groups and could create problems for the future. OECD countries can effectively meet these challenges only with policies that are well designed and backed by adequate resources. Having been spared the worst impacts of the crisis, major emerging economies face different challenges. However, the experience of OECD countries is relevant for emerging economies as they continue to build and "crisis-proof" their social protection systems.
The financial crisis has fuelled a social crisis
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