Taxing for Shared Prosperity

Taxing for Shared Prosperity

Date: 
Friday, December 8, 2017
Type: 
Public information and advocacy materials
Abstract

Taxing for Shared Prosperity: Policy Options for the Asia-Pacific Region

The Asia-Pacific region is at a crossroads.

Our report charters a course for the region’s economies to be dened by inclusive growth and shared prosperity. The region was a model for ‘growing with equity’ in the 1970s and 1980s. Rapid economic growth was achieved without major increases in inequality. However an economic takeoff and market-oriented reforms in recent years, despite helping hundreds of millions to be lifted from extreme poverty, has been accompanied by growing income and wealth gaps between rich and poor.

This increase in inequality has greatly diminished the ability of economic growth to reduce poverty. The share of the poorest income groups in total consumption has considerably decreased in developing countries in Asia and the Pacic during the high-growth decades since the 1990s. In sharp contrast, the Asia-Pacic’s ‘super-rich’ have increased – even overtaking their peers in North America and Europe in both headcount and total wealth. This poses a signicant threat to further economic development and social stability in the region, as income and wealth inequalities also tend to reinforce each other in a downward spiral, if left unchecked.

Governments in the Asia-Pacic region must now advance a comprehensive strategy to reverse rising economic inequality. Public nance – and tax policies in particular – are vital for this purpose. Taxes provide the primary source of nancing for public education, healthcare and investment for jobs. These public services equip poor people with better skills and prospects in the job market, and provide better chances to improve their economic status on their own merit. Taxes are also the nancial backbone for social security networks and basic welfare, providing essential support to poor people against unexpected risks and preventing them from falling back into poverty during difcult times. Crucially, progressive tax policies are central to fostering a fairer distribution of income and wealth. In OECD countries, for instance, tax and transfers together bring down overall income inequality by more than a third, on average.

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