CEPAL Review

Cepal Review is the leading journal for the study of economic and social development issues in Latin America and the Caribbean. Edited by the Economic Commission for Latin America, each issue focuses on economic trends, industrialization, income distribution, technological development and monetary systems, as well as the implementation of economic reform and transfer of technology. Written in English and Spanish (Revista de la Cepal), each tri-annual issue offers approximately 12 studies and essays undertaken by authoritative experts or gathered from conference proceedings.

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The paradox of progressivity in low-tax countries: income tax in Guatemala

The Kakwani and Reynolds-Smolensky indices are used to analyse the consequences of tax reforms in terms of a tax’s progressivity and redistributive capacity. Nonetheless, these indices can only serve as a basis for normative judgments in reforms where revenue remains constant. As this is generally not the case with tax reforms in practice, the Reynolds-Smolensky index is usually broken down into changes in the average tax rate and changes in the Kakwani index. This article argues that this procedure has serious disadvantages, especially in countries with low levels of tax revenue. To help overcome these problems, a number of alternative indicators are proposed based on the traditional indices, to make it possible to analyse the redistributive and progressivity effects of reforms that generate changes in revenue. These indicators are then used to analyse hypothetical reforms to income tax in Guatemala.

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