Tax Incidence in Peru (II)

Tax incidence on taxpayers may differ across regions but, are taxpayers equally spread accross the country?

The table below shows how only 5 departments (and 1 strange case) are over the average level of taxpayers/population (12%).

But, surprisingly, another 8 departments with around one million of inhabitants have an extremely narrow tax base (Cusco, Lambayeque, La Libertad, Junín, Piura, Ancash, Puno and Cajamarca). It is easy to identify two groups: those around Cusco, in the Andean dorsal, which are montainous and with rural economies; and those in the North coast, from Lima to the Ecuador's border, these are undertaxed populations.

Among the departments "over the line", let apart Lima, the rest of departments (Arequipa, Moquegua and Tacna) are all overtaxed and near the Chilean border (all this region is known for their mining wealths).

So Lima's contribution to the national burden comes to barely a 90% of total revenues. Lima's taxpayers represent 58% of total tax base. But Lima's population represents 32% of total Peruvians. Why?

Lima 90% of total tax revenue 58% of total taxpayers 32% of total population

There are two forces that causes this distribution of the tax system:

a) Inequality. The assets are unequally distributed. Those in the Metropolitan area posseses much more resources ($/capita), but also corporations and other taxable agents have their fiscal address in Lima. That's the explanation for the 90%.

b) The Poor don't pay. Tax systems around the world avoid to tax poor people, for ethical (poor should receive, not pay) and technical reasons (a Cost-Benefits Calculus: monitor the poor is more expensive than the quantity to extract them).

The problem is that we are assuming that the proportion Rich/Poor out-of-Lima is higher than in Lima, and it is not necessarily true.