This report examines the impact of personal income tax on income inequality in Ecuador from 2007 to 2011, revealing that while taxes are progressive, their redistributive effect is limited.
(Generated with the help of GPT-4)
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| Report location: | source |
| Language: | English |
| Publisher: | |
| Authors: | Liliana Cano |
| Geographic focus: | Ecuador |
| Page count: | páginas. 56-7 |
The research utilized individual income tax return data, computing indices of tax progressivity and redistributive impact. Microsimulation techniques simulated redistributive effects under various taxable income scenarios. The study also calculated effective tax rates for top income groups and derived optimal income taxes for the wealthiest individuals based on taxable income elasticity literature.
(Generated with the help of GPT-4)
The research analyzes Ecuador's personal income tax system between 2007 and 2011, focusing on its progressivity and redistributive effect. It employs indices like Kakwani and Suits to measure tax progressivity and Reynolds-Smolensky for redistribution. Microsimulation techniques are used to simulate tax effects under different scenarios. The study finds that high-income individuals benefit more from tax deductions, reducing the system's redistributive capacity. It also calculates effective tax rates for top earners and suggests optimal tax rates using income elasticity literature. The findings indicate that despite progressive tax design, the actual impact on income inequality is minimal due to legal deductions favoring the wealthy.
(Generated with the help of GPT-4)