Table IV. Impact of fraud on tax...

Table IV.

Impact of fraud on tax progressivity and inequality

	Original	Corrected	Diff. (%)	No fraud	Diff. (%)	Original	Corrected	Diff. (%)	No fraud	Diff. (%)
Indicators	(1)	(2)	(2 − 1)/(1)	(3)	(3 − 2)/(2)	(1)	(2)	(2 − 1)/(1)	(3)	(3 − 2)/(2)
	2001					2002
Pre-tax Gini	37.50	39.60	6	39.60	0	36.88	37.60	2	37.60	0
Post-tax Gini	32.30	35.21	9	33.74	−4	31.72	32.75	3	32.20	−2
Average tax rate	15.79	14.76	−7	17.25	17	15.86	15.43	−3	16.43	6
Redistribution	5.20	4.39	−16	5.86	33	5.16	4.85	−6	5.40	11
Progressivity	28.25	25.90	−8	28.53	10	27.88	27.09	−3	27.93	3
Tax rate top 10%	23.84	21.18	−11	25.76	22	24.10	23.02	−4	24.85	8
Tax rate top 1%	33.97	27.17	−20	36.70	35	34.12	31.34	−8	35.18	12
	2003					2004
Pre-tax Gini	38.80	39.72	2	39.72	0	40.82	42.04	3	42.04	0
Post-tax Gini	33.88	35.07	4	34.55	−1	35.91	37.46	4	36.82	−2
Average tax rate	13.74	13.43	−2	14.36	7	14.33	14.01	−2	15.01	7
Redistribution	4.93	4.64	−6	5.17	11	4.91	4.58	−7	5.23	14
Progressivity	31.45	30.48	−3	31.35	3	29.87	28.61	−4	30.05	5
Tax rate top 10%	21.96	21.02	−4	22.75	8	22.45	21.39	−5	23.28	9
Tax rate top 1%	30.86	28.15	−9	32.09	14	29.70	26.42	−11	31.05	18

	Original	Corrected	Diff. (%)	No fraud	Diff. (%)	Original	Corrected	Diff. (%)	No fraud	Diff. (%)
Indicators	(1)	(2)	(2 − 1)/(1)	(3)	(3 − 2)/(2)	(1)	(2)	(2 − 1)/(1)	(3)	(3 − 2)/(2)
	2001					2002
Pre-tax Gini	37.50	39.60	6	39.60	0	36.88	37.60	2	37.60	0
Post-tax Gini	32.30	35.21	9	33.74	−4	31.72	32.75	3	32.20	−2
Average tax rate	15.79	14.76	−7	17.25	17	15.86	15.43	−3	16.43	6
Redistribution	5.20	4.39	−16	5.86	33	5.16	4.85	−6	5.40	11
Progressivity	28.25	25.90	−8	28.53	10	27.88	27.09	−3	27.93	3
Tax rate top 10%	23.84	21.18	−11	25.76	22	24.10	23.02	−4	24.85	8
Tax rate top 1%	33.97	27.17	−20	36.70	35	34.12	31.34	−8	35.18	12
	2003					2004
Pre-tax Gini	38.80	39.72	2	39.72	0	40.82	42.04	3	42.04	0
Post-tax Gini	33.88	35.07	4	34.55	−1	35.91	37.46	4	36.82	−2
Average tax rate	13.74	13.43	−2	14.36	7	14.33	14.01	−2	15.01	7
Redistribution	4.93	4.64	−6	5.17	11	4.91	4.58	−7	5.23	14
Progressivity	31.45	30.48	−3	31.35	3	29.87	28.61	−4	30.05	5
Tax rate top 10%	21.96	21.02	−4	22.75	8	22.45	21.39	−5	23.28	9
Tax rate top 1%	30.86	28.15	−9	32.09	14	29.70	26.42	−11	31.05	18

Notes:

In all cases, the sum of net revenues from all sources is the income reference. The “original” scenario is the estimate readily obtained from the data, affected by under-reporting. “Corrected” shows the real behaviour of the tax, if evasion was distributed as obtained, while the “no fraud” scenario shows how the tax would have been distributed under full compliance. The redistribution indicator is the Reynolds–Smolensky index, corresponding to the difference between the Gini of pre-tax and post-tax incomes. The progressivity indicator is the Kakwani index: the difference between the pre-tax Gini and the concentration of tax payments. The tax rates for the top 10 and 1% refer to the distribution of corrected incomes, and they are calculated as tax due over total (real) income (then averaged for the relevant group). To improve readability, all indices have been multiplied by 100. The existence of special treatment for long-term capital gains (“base especial”) has been included in the calculations. This “base especial” had a uniform tax rate of 18% in 2001-2002 and of 15% in 2003-2004

Source: Author’s calculations, using Stata “progress” module

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