Conference Paper Symposium on Poverty, Inequality, and Policy in Latin America
The Impact of Brazil's Tax-Benefit System on Inequality and Poverty
15 Jul 2005
The Brazilian government raises an amount of taxes that represents 35% of GDP and spends more than two-thirds of this on social programmes. These shares are in pair with the OECD averages and well in excess of Latin America averages. However, while the tax-benefit system in OECD countries notably reduces market inequality, in Brazil the government has not been able to significantly alleviate inequality and poverty. This paper investigates the impact of the government budget, particularly taxes and cash transfers, on income distribution in Brazil, and evaluates its efficiency and effectiveness in reducing inequality and poverty. The analysis also illustrates how microsimulation is a useful and powerful method for evaluating the impact of policy on income distribution.