The impact of fiscal policy on equity

Inequality pose a critical challenge for government. In a broad sense, rising inequalities can not only harm economic growth and create social distress, but can also negatively affect access to opportunities and basic public services. To a greater or lesser extent, depending on the societal agreement, governments play a role in income redistribution through taxes and transfers. In this context, the efficiency and effectiveness of fiscal policy are essential to achieve more equal societies and fight poverty. In the case of Latin America and the Caribbean (LAC) this is particularly relevant as, despite recent improvements, the region is still the most unequal in the world. According to the latest available evidence, on average in 2012, inequality in LAC measured by the Gini coefficient after taxes and transfers is 70% higher than in OECD member countries, with scores of 0.49 and 0.29, respectively (see ).