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Cover IMF Working Papers
Measuring the Redistributive Capacity of Tax Policies
Charles Vellutini and Juan Carlos Benitez
This paper presents a novel technique to measure and compare the redistributive capacity of observed tax (or transfer) policies. The technique is based on income distribution simulations and controls for differences in pre-tax income distributions. It assumes that the only information on the pre-tax distribution available in each country-year is the Gini coefficient and the mean (GDP per capita). We illustrate the technique with an application to the personal income tax, using a dataset of 108 countries over the 2007-2018 period.
Keywords:
Income distribution; redistribution; progressivity; personal income tax; novel technique; PIT redistribution; TRANSPLANT-AND-COMPARE method; PIT Progressive; market income Gini Coefficients; Income distribution; Income; Personal income tax; Progressive taxation; Income inequality; Global
Cover IMF Working Papers
Front Matter
Charles Vellutini and Juan Carlos Benitez

. JEL Classification Numbers: D31,C63, H23, H24 Keywords: Income distribution, redistribution, progressivity, personal income tax Author’s E-Mail Address: cvellutini@imf.org ; ibenitez@imf.org Contents ABSTRACT I. INTRODUCTION II. MEASURING THE REDISTRIBUTE EFFECT OF TAX POLICY A. Progressivity and Redistribution Indices B. Correcting for Differences in Pre-Tax Distributions III. A SIMPLIFIED IMPLEMENTATION OF THE TRANSPLANT-AND-COMPARE METHOD . A. The Transplant-and-Compare Mechanics B. Using Parametric Distributions of Pre-Tax Income C

Cover IMF Working Papers
Measuring the Redistributive Capacity of Tax Policies
Charles Vellutini and Juan Carlos Benitez

contribution in that respect is Dardanoni and Lambert (2002) , which proposes to “transplant” tax regimes into a common base with an identical pre-tax distribution, where they can be safely compared. A critical point, however, is that this procedure relies on consistent and comparable household-level microdata of income – a challenge in many emerging economies and low-income countries. With a focus on applicability in environments with limited data availability, this paper introduces a simplified implementation of the transplant-and-compare method. It is assumed that the

Keywords:
tax distribution; market income; tax schedule; EME country group; schedule mapping; Income distribution; Personal income tax