Publication: Uruguay : Poverty and Social Impact Assessment of the Tax Reform
Date
2008-05
ISSN
Published
2008-05
Author(s)
World Bank
Abstract
The Poverty and Social Impact Assessment
(PSIA) analyzes the impact of the tax reform, which came
into effect in July 2007, on tax incidence and poverty in
Uruguay. The essence of the reform is the introduction of a
dual personal income tax, which taxes labor income at
progressive rates and capital income at lower, proportional
rates. A further modification is the reduction in the
revenue share of indirect taxes. The study aims to provide
information to inform policy discussion on distributional
implications of tax reform. In addition, it gives impetus
for further more sophisticated analysis of current and
proposed tax reforms. In designing a tax system, a trade-off
exists between efficiency, equity and administrative
simplicity. The paper focuses on one aspect of this
trade-off by evaluating the equity impact of the tax reform
in Uruguay. Neither the efficiency of the post-reform tax
system nor the effect on tax administration is examined.
Assessing the distributional impact of a tax reform is
important, firstly, as there is a potential to mitigate the
equity-efficiency trade-off in the design of tax structures,
and secondly, as the expenditure side of the budget can then
be employed to diminish any adverse distributional impacts.
Citation
“World Bank. 2008. Uruguay : Poverty and Social Impact Assessment of the Tax Reform. © Washington, DC. http://openknowledge.worldbank.org/entities/publication/accf9cc3-4a54-5e2b-9932-9adacc12a98d License: CC BY 3.0 IGO.”