Reproducibility package for Taxes, Spending And Equity: International Patterns And Lessons For Developing Countries

This paper examines the global evidence concerning which households pay which taxes and who benefits from what spending – and critically, what the net effect is for different households across the income distribution. The aim is to determine what patterns and lessons emerge for designing progressive fiscal policies. A global dataset of 96 countries is assembled spanning all regions of the world and all national income levels, grounded in the Commitment to Equity (CEQ) approach to fiscal incidence. Inequality is reduced by the taxes and spending covered in the CEQ framework in all countries studied. While richer countries reduce inequality to a greater degree on average, there is more variation within income levels than between them, thus highlighting the fact that progressive taxes and spending can be achieved at all income levels. However, poverty rises in all low-income countries in the data, most lower-middle income ones, and a majority of upper-middle income countries. This is because the benefit of transfers to poorer households usually are not sufficient to offset the burden of consumption taxes.