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Abstract
Purpose: This study aims to explore the role of taxation in addressing economic inequality, focusing on progressive tax systems and their effectiveness in redistributing wealth and mitigating disparities.
Research Design and Methodology: The research employs a qualitative literature analysis, synthesizing insights from seminal works, empirical studies, and cross-country comparisons. Key sources include Piketty's "Capital in the Twenty-First Century," Saez and Zucman's research on tax evasion, and various OECD and UNU-WIDER studies.
Findings and Discussion: The analysis reveals that well-designed progressive tax systems are crucial for reducing economic inequality. Piketty's findings highlight the effectiveness of high marginal tax rates in decreasing wealth concentration. Saez and Zucman underscore the importance of robust tax enforcement to combat evasion. Cross-country comparisons show that countries with progressive tax structures and substantial social spending, such as the Scandinavian nations, achieve lower levels of inequality. However, challenges remain in developing economies, where tailored approaches to tax compliance and administration are necessary.
Implications: The study underscores the need for policymakers to design and implement progressive tax policies effectively. This includes closing tax loopholes, enhancing compliance, and integrating tax policies with broader social measures. International cooperation is essential to address tax evasion and avoidance. The research provides valuable insights for designing equitable tax systems that can promote social equity and economic stability.
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References
- Atkinson, A. B., & Piketty, T. (2007). Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries. Oxford University Press.
- Bird, R. M., & Gendron, P.-P. (2007). The VAT in Developing and Transitional Countries. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9780511611193
- Bird, R. M., & Zolt, E. M. (2011). Tax policy in emerging countries. Environment and Planning C: Government and Policy, 29(1), 4-22. https://doi.org/10.1068/c2901
- Christensen, J., & Kapoor, S. (2004). Tax avoidance, tax competition, and globalisation: Making tax justice a focus for global policy. Development, 47(1), 69-75. https://doi.org/10.1057/palgrave.development.1100030
- Fjeldstad, O.-H., & Heggstad, K. (2012). Building taxpayer culture in Mozambique, Tanzania, and Zambia: Achievements, challenges, and policy recommendations. Chr. Michelsen Institute. https://doi.org/10.2139/ssrn.2107691
- Joshi, A., Prichard, W., & Heady, C. (2014). Taxing the informal economy: Challenges, possibilities, and remaining questions. IDS Working Papers, 2014(429), 1-37. https://doi.org/10.1111/j.2040-0209.2014.00429.x
- Joumard, I., Pisu, M., & Bloch, D. (2012). Tackling income inequality: The role of taxes and transfers. OECD Journal: Economic Studies. https://doi.org/10.1787/eco_studies-2012-5k8zs3twbrd8
- Keen, M. (2012). Taxation and development—Again. IMF Working Papers, 12/220. https://doi.org/10.5089/9781475510225.001
- Lustig, N. (2018). Fiscal policy, inequality, and poverty in Latin America: Recent developments and future challenges. UNU-WIDER Working Paper. https://doi.org/10.35188/UNU-WIDER/2018/516-2
- Martin, I. W., & Prasad, M. (2014). Taxes and fiscal sociology. Annual Review of Sociology, 40, 331-345. https://doi.org/10.1146/annurev-soc-071913-043229
- Piketty, T. (2014). Capital in the Twenty-First Century (A. Goldhammer, Trans.). Cambridge, MA: Belknap Press of Harvard University Press. https://doi.org/10.1017/S0047279415000616
- Saez, E., & Zucman, G. (2019). The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. New York, NY: W.W. Norton & Company.
- Slemrod, J., & Gillitzer, C. (2014). Tax Systems. Cambridge, MA: MIT Press. https://doi.org/10.7551/mitpress/9780262027942.001.0001
- Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven, CT: Yale University Press.
References
Atkinson, A. B., & Piketty, T. (2007). Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries. Oxford University Press.
Bird, R. M., & Gendron, P.-P. (2007). The VAT in Developing and Transitional Countries. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9780511611193
Bird, R. M., & Zolt, E. M. (2011). Tax policy in emerging countries. Environment and Planning C: Government and Policy, 29(1), 4-22. https://doi.org/10.1068/c2901
Christensen, J., & Kapoor, S. (2004). Tax avoidance, tax competition, and globalisation: Making tax justice a focus for global policy. Development, 47(1), 69-75. https://doi.org/10.1057/palgrave.development.1100030
Fjeldstad, O.-H., & Heggstad, K. (2012). Building taxpayer culture in Mozambique, Tanzania, and Zambia: Achievements, challenges, and policy recommendations. Chr. Michelsen Institute. https://doi.org/10.2139/ssrn.2107691
Joshi, A., Prichard, W., & Heady, C. (2014). Taxing the informal economy: Challenges, possibilities, and remaining questions. IDS Working Papers, 2014(429), 1-37. https://doi.org/10.1111/j.2040-0209.2014.00429.x
Joumard, I., Pisu, M., & Bloch, D. (2012). Tackling income inequality: The role of taxes and transfers. OECD Journal: Economic Studies. https://doi.org/10.1787/eco_studies-2012-5k8zs3twbrd8
Keen, M. (2012). Taxation and development—Again. IMF Working Papers, 12/220. https://doi.org/10.5089/9781475510225.001
Lustig, N. (2018). Fiscal policy, inequality, and poverty in Latin America: Recent developments and future challenges. UNU-WIDER Working Paper. https://doi.org/10.35188/UNU-WIDER/2018/516-2
Martin, I. W., & Prasad, M. (2014). Taxes and fiscal sociology. Annual Review of Sociology, 40, 331-345. https://doi.org/10.1146/annurev-soc-071913-043229
Piketty, T. (2014). Capital in the Twenty-First Century (A. Goldhammer, Trans.). Cambridge, MA: Belknap Press of Harvard University Press. https://doi.org/10.1017/S0047279415000616
Saez, E., & Zucman, G. (2019). The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. New York, NY: W.W. Norton & Company.
Slemrod, J., & Gillitzer, C. (2014). Tax Systems. Cambridge, MA: MIT Press. https://doi.org/10.7551/mitpress/9780262027942.001.0001
Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven, CT: Yale University Press.