Wednesday, March 23, 2005

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.


Blogger Alex Guerrero said...

"La actividad económica está muy concentrada geográficamente y la zona metropolitana de X representa más de un 50 por ciento del PIB (1999) y tiene un 40 por ciento de la población.

Si bien esto fomenta efectos de aglomeración, también produce externalidades negativas ambientales y de congestión. El resultado es una economía dual con una capital moderna y dinámica y regiones pobres y relativamente subdesarrolladas.
" (OCDE).

Someone could think that this OECD report is about Peru, but it's about Chile!!!

Anyways, the two countries are very similar (comparison??).

March 23, 2005 1:52 AM  
Blogger Alex Guerrero said...

If you look at the levels of taxpayers growth, by department, you will observe that the table in this post is more striking than it seems because, from 1997 to the end of 2003, the growth of the tax base was +50%!!!!!

It means that in 1997-2000 (it barely remained at the same level), the number of taxpayers (and the % on total pop.) was a third inferior!!

March 23, 2005 4:05 AM  

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