Workshop in Montevideo Analyses Taxation of High Incomes to Reduce Inequality

At the Workshop on inequality and high income tax, held in Montevideo, Uruguay, on 1 and 2 October, representatives from governments and academia discussed the tools available to Latin American countries to tax high incomes and improve equitable distribution.

The workshop was organized by the Economic Commission for Latin America and the Caribbean (ECLAC), along with the Spanish Agency for International Development Cooperation (AECID) and Uruguay's Centre for Fiscal Studies (CEF).

The event was opened by Juan Pablo Jiménez, Director of the ECLAC office in Montevideo, Fernando Lorenzo, Uruguayan Minister of Economy and Finance, Rosa Grosskoff, Executive Director of the Centre for Fiscal Studies (CEF), Rodrigo Arim, Dean of the Faculty of the Economics and Administration Faculty of the University of the Republic (Udelar) and Blanca Rodríguez, from the AECID office in Uruguay.

Lorenzo said that the issue of taxation of high incomes "inevitably refers to the structure of income distribution and how tax instruments are able to operate on that phenomenon".

The Director of ECLAC in Montevideo noted that "the main feature of Latin American inequality is that a large amount of income is concentrated within a small number of families". That is why "greater taxation would bring more resources for social programmes and would improve society's perception of the effects of tax policy on equitable distribution".

At the end of the workshop participants reached a number of preliminary conclusions including the fact that, even though there has been significant progress in analyzing the participation of high incomes in distribution and in considering its contribution to income tax collecting in the developed world, there is still a long way to go.

This is particularly the case in Latin American countries, where these analyses are very recent or very few.

That is why it was also agreed that it is essential to further study the participation of the richest households and individuals in distribution and to improve the existing information by incorporating new analysis tools, such as adjustments for income underreporting or data from tax returns.

Another conclusion was the need to investigate which tax reforms are still pending in Latin America to increase tax collection of high income groups. This measure would improve the distributive impact in the countries of the region.