Impact of the Level and Structure of the Tax Burden on Citizens Inequality

Abstract

The purpose of this study is to determine the impact of the structure and level of the tax burden on inequality of citizens, using the example of the countries of the Organization for Economic Cooperation and Development (OECD). The hypothesis was that the structure and level of the tax burden affect citizens inequality. This hypothesis was tested using a correlation and regression analysis of the dependence of citizens inequality level on the tax burden structure by decomposing it into separate taxes. The Gini coefficient and the share of income of the tenth decile group were chosen as indicators of inequality. The calculations were carried out using the Data Analysis in MS Excel for the years 2000 and 2020 on the basis of statistical data from the World Bank and OECD. The data set formed for the study contains about 1 thousand indicators. The share of all taxes in GDP has the closest relationship with inequality: it explains the dynamics of the level of inequality by 53–74%. The severity of the tax burden has a more significant impact on inequality than its structure. The decrease or increase in the share of a tax in the structure of the tax burden characterizes the weakening or strengthening of the impact of this tax on inequality. The change in the structure of the tax burden in OECD countries in 2020 compared to 2000 contributed to the smoothing of citizens inequality by increasing the share of income tax while reducing the share of indirect taxes. The relationship between the indicators of tax burden and inequality is non-linear. It fits into the concept of A. Laffer. Establishing the type of this dependence will make it possible to solve the problem of optimizing the structure of tax burden in order to smooth inequality.