Latin American countries that aggressively redistributed wealth among their citizens have successfully reduced the gap between the haves and have-nots, according to a book published by the Economic Commission for Latin America and the Caribbean (ECLAC).
Uruguay and the socialist country of Venezuela have seen a drastic decrease in inequality over the past years, says the book titled “Inequality, Concentration of Income and Taxation of High Incomes in Latin America.”
The book, according to TelesurTV, examines the relationship between inequality and taxation policies, revealing that government intervention has succeeded in reducing inequality.
Latin America is still the most unequal region in the world, but the book says many countries in the region have adopted effective policies to deal with inequality.
Redistribution of wealth reduced inequality in 15 of the 17 countries that the book examined, says TelesurTV. During this period, Bolivia, Nicaragua, Argentina, and Venezuela registered the largest annual drops in the Gini coefficient.
The book primarily focuses on the impacts of taxation policies on higher-earners and wealth redistribution, and recommends a series of actions to deal with inequality.
Weak taxation systems are the main causes of inequality in the region, according to the book. Tax avoidance in the region averages 51.4%, compared to 28.7% on average in 11 European countries.
According to ECLAC’s own assessment, tax-to-GDP ratio in Latin America rose from 19.5% to 21.2% over the 2009-12 period. It shows that tax revenues rose significantly across the region over the 1990-2013 period.
While this revenue boost has provided governments in the region increased capacity to improve spending on social programs and physical infrastructure, the tax to GDP ratio is still 13% below the OECD average of 34.1%.