The Development Finance International Group (DFI) is a non-profit capacity-building, advocacy, advisory and research group that works with more than 50 governments and international organizations worldwide.
Oxfam is an international confederation working together with partners and local communities in more than 90 countries to end the injustices that cause poverty.
We believe inequality is far from inevitable. It is a policy choice and governments have considerable powers to reduce the gap between the rich and poor in their countries. We developed this index to measure and monitor government policy commitments to reducing inequality, but also to offer a robust, evidence-based alternative to other existing income and wealth measuring systems which are sorely lacking in data coverage and quality.
Overall Rank: 13
Over the last 30 year, Australia has also enjoyed a phase of uninterrupted economic growth however not everyone has felt the benefits. The proportion of people living in income poverty has stuck at around 9 percent over the same period and inequality has risen.
People living in single-parent families, unemployed people, people with disabilities and indigenous Australians are particularly vulnerable to economic disadvantage, poverty and the impacts of rising inequality. Meanwhile households at the top end of the income spectrum have tended to remain in those income groups, and the fortunes of children are still determined by their parents’ earnings.
The Australian Government could do much more to tackle inequality which has been gradually rising over the last three decades. However, recent policy decisions are making the situation worse – not better. Australia was found to be amongst the biggest cutters of health spending of all the 157 countries examined. Australia’s score on labour rights, at 36, also put it well below most OECD countries.
Up to the end of 2017, Australia was one of just15 countries to have cut corporate income tax rates. On a more positive note the government dumped plans to introduce further tax cuts for large corporations in August 2018. This was a big win in the fight against inequality in the country. While Oxfam welcomed this back-down on extending corporate tax cuts, the Australian Government still needs to do more to support and promote international cooperation on tackling tax avoidance. Australia has done well on some of the tax indicators in this report, but it lags behind many countries on action to make corporate taxation more transparent through the introduction of country-by-country reporting.
Planned changes to personal income tax rates will also erode the progressivity of Australia’s tax system if they go ahead. This is likely to affect Australia’s score on tax in the future. From July 2018, Australia’s Federal Government started phasing in plans to ‘flatten’ personal income tax rates, so that by 2024 all people earning between AUD$41k and AUD$200k are taxed at the same marginal tax rate of 32.5 percent. Not only would this flattening of personal income tax rates exacerbate inequality, by disproportionately benefiting already privileged high income groups, it would entrench gender inequality. High-income earners are mostly men, so cutting top tax rates will disproportionately benefit men compared to women. It has been estimated that this scheduled personal income tax cut will benefit men relative to women by a factor of 2:1.
Estimates suggest that Zambia’s Gini coefficient stands at 0.65, making the country one of the most unequal in the world. Absolute poverty stands at 54.4% (albeit only in income terms). Rural poverty is estimated at 76.6 percent (three times higher than obtaining in urban areas, at 23.4 percent)1. This scenario is indicative of a rural-urban face of inequality.
Zambia is classified by the World Bank as a lower middle-income country, mainly due to growth led by the extractive industries. Mining accounts for about 80% of total export value and 30 percent of tax revenue and constitutes 62% of foreign direct investment into the country (World Bank, 2016). In 2015, the extractive industry contributed 26% of government revenue and accounted for 10% of GDP (EITI 2015 Reconciliation Report).
However, in 2016 Zambia’s economic growth had dramatically declined after enjoying over a decade of impressive growth at an average of 6% to about 3% by the end of 2016. Projections of GDP growth of 5% made for 2018 have since been revised downwards by the government. The country is also faced with decreasing revenue inflows arising from reduced productivity (a high-net importing economy), lack of value addition to natural resource extraction, imperfections in progressivity and efficiency of the tax system, a narrow tax base, a high incidence of tax avoidance and evasion and decreasing donor funds.
Over the past five years, Zambia’s external debt has risen dramatically, beginning with the three Eurobonds issued in 2012, 2014 and 2015 at values of USD750 million, USD1billion and USD1.25 billion respectively. Concerns of growing domestic debt and the negative impact this is having on private sector activity have also been echoed by industry bodies and policy and research think tanks. The Debt Sustainability Analysis (DSA) conducted by Government in April 2018 revealed that if no measures were taken, the public debt to GDP ratio (domestic and external debt) would exceed 60% in the medium term, above the sustainability threshold of 56%. External debt would increase in the medium term from 38.5 percent of GDP in 2018 to 45.2 percent, above the threshold of 40% in 2020. The ratio of debt service to revenue would also breach the 20% threshold in the medium term, rising from16.9% in 2018 to 24.4% by 20202.
Growing debt and the inability to maximise taxation of the private sector and high-net worth individuals3 are occurring at a time when citizens are experiencing high tax burden arising from the introduction of numerous consumption taxes, fees and levies.
1 2015 Living Conditions Monitoring Survey- Zambia Central Statistical Office
2 Speech delivered by the Permanent Secretary-Economic Management and Finance at the Economics Association of Zambia public discussion on Debt Restructuring in Zambia held on Thursday, 23rd August 2018 at Intercontinential Hotel, Lusaka’
3 Since 2017, reports of the Financial Intelligence Centre have revealed significant occurrence of suspicious financial transactions involving tax havens and high net worth individuals and politically exposed persons in Zambia.
Belgium has enjoyed low levels of inequality for many years thanks to a long tradition of progressive policies.
Throughout its history Belgium has always had high levels of trade union membership and a respected tradition of social dialogue between employers and employees. The strong negotiation position of labor unions is reflected in low average pay ratios of just 2.4 between the highest paid 10 percent of employees and the lowest paid 10 percent. Added to this Belgium’s progressive tax system and high social spending further reduce inequality.
However, this system is increasingly under pressure. Over the course of the last year, labour unions have highlighted several occasions where the government has not respected the outcome of dialogue between employers and employees. Regressive tax reforms introduced in 2015 lowered personal income taxes (which would benefit wealthier people) and raised taxes on consumption (which would hit the poorest hardest). In 2018, the corporate tax rate in Belgium was lowered from almost 34 percent to 29 percent and will be further lowered to 25 percent in 2020. Although some corporate tax incentives were reformed to compensate for this, others remain and not enough is being done to counter corporate tax dodging. Put together, these tax reforms have created a budget gap and have led to underspending on vital public services and social security.
Cuts in funding for public services and social security affect everyone but the poorest are hit hardest. In 2017, over 20 percent of the Belgian population was at risk of poverty or social exclusion – however the figures are much higher amongst vulnerable groups including the unemployed (66 percent), single-parent families (50 percent), people with low levels of education (34 percent) and people born outside Belgium (who were three times more vulnerable to poverty as native Belgians). Several studies confirm that people with low levels of education and people who were born outside of Belgium live shorter lives, have less access to health care, and that their children have fewer opportunities at school.
The Belgium Minimum Income Network, a broad coalition of poverty organizations and labor unions, are calling for the government to increase minimum benefits levels above the poverty line. Although the current government has marginally increased some basic benefits, other benefits such as those for the unemployed and long-term sick, are being gradually reduced and restricted so that they may not be accessible to those that need them most.
Brazil has taken a U-turn on inequality in the last four years. A fiscal, economic and political crisis created space for an unpopular agenda that was pushed through by the new government between 2016 and 2018 – reversing two decades of action on inequality and social justice.
From 1998, and the introduction of Brasil’s new Constitution, social spending expanded greatly. In 1990, social spending represented just 44 percent of the non-financial budget but by 2014 it had reached a peak of 77 percent. In in 2016 the new government rapidly cut back social spending to 60 percent.
Most of this money is spent on pensions, education and health (these later two are guaranteed a minimum proportion of the federal, state and local budget under the Constitution). Other important social policies such as poverty alleviation (notably the Conditional Cash Transfer programme “Bolsa Família”), labour protection, housing, women’s rights, family farmers, and the environment, account for a smaller proportion of the total budget but have been the first to pay the price of austerity.
According to an Oxfam Brasil, INESC, and Centre for Economic and Social Rights’ study, funding for women’s rights was cut by 53 percent between 2014 and 2017, housing by 62 percent, climate change by 72 percent, and food security by 76 percent.
The government also proposed and approved a Constitutional Amendment that largely freezes all Federal spending for 20 years. This is a major setback in tackling poverty and inequality and represents a huge departure from the principles of social justice and equality enshrined in the 1988 Constitution.
The government has not changed Brazil’s regressive tax system, which generates a tax burden of 32 percent on the incomes of the poorest 10 percent, compared to just 21 percent of the incomes of the richest 10 percent. To rebalance the tax system the government should remove tax breaks for the wealthy – such as exemptions on dividends from shares, increase other taxes on wealth, and further reduce consumer taxes such as VAT which hit the poorest hardest.
New regulation introduced in 2016 also represents a major backwards step on labour rights. The new rules, which for example exclude transportation from working hours, and relax the rules regarding contract duration, will hit poor and black women hardest as they tend to have the most precarious jobs and income and are the first ones to be dismissed in times of economic crisis.
Inequality continues to rise in Canada as policies to tackle it have inadequately addressed the problem. In 2017, the top 10 percent of Canadians owned 58 percent of all wealth in Canada, of which 26 percent was owned by the richest 1 percent. Since 2000, the number of billionaires has more than doubled, from 15 to 39, and their wealth almost tripled from USD 46.2 billion to USD 133.8 billion. In 2017, Canada’s 39 billionaires collectively owned USD 134 billion, enough to pay for universal child care and lift all 4.9 million people living in poverty above the poverty line.
In the three areas critical to reducing inequality – social spending, progressive taxation and labour rights – Canada has considerable room for improvement.
In terms of taxation, the government continues to crack down on tax avoidance and is implementing the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting measures. However, the corporate tax rate has halved over the past 15 years and the tax system provides significant loopholes for the rich to avoid paying taxes. As a result, the government loses out on billions of dollars in public revenues which could be spent on social programs to reduce inequality, including universal child care, affordable housing and social assistance. And while some provinces have passed legislation over the past years to increase the minimum wage, these increases are still far from meeting living wage standards.
Quebec has resisted the rise in inequality far better than the rest of Canada over the last 30 years. The government of Quebec continues to raise the progressivity and productivity of the tax system, having most recently adopted an action plan to ensure tax fairness and to address tax havens. Growing public revenues have allowed the government to invest in public services, such as low tuition fees for universities, universal pharma care, generous parental leave and subsidized and affordable educational child care services. This last measure has had a significant impact on mother’s participation in the labour market reaching 79 percent in 2017. Quebec also has the highest unionization rates in Canada, placing it top among OECD countries, and supports alternative business models, such as cooperatives.
Canada should also step up efforts to reduce gender inequality, which is inextricably linked to economic inequality. Inequality is bad for everyone, but more so for women making up the bottom rank of the economy. The wage gap persists at 31 percent and increases for women from migrant communities and indigenous women to a staggering 54 percent. Overall women make up 61 percent of minimum wage earners. Investments in the care economy have shown to have triple benefits in increasing overall employment and GDP, addressing the care crisis and moving the needle on gender equality.
There have been some positive changes to the tax system in Colombia, but it is still clearly unequal. Progressive moves include an increase in personal income tax rates and Personal income tax (which tends to be paid by the better off) has increased as has corporate tax tax rates - which were increased ere also increased by 9 percent in 2017/18 reversing cuts incuts made in previous years. However, the effective tax rate paid by many companies falls well below this figure as a result of tax exemptions and benefits. This is particularly true in the finance and commodity sectors where some companies are paying effective tax rates as low 2.2 percent.
Public health spending was increased by over four 4 percent in 2017/18 – the second biggest increase in health spending globally in this period. However, these resources will not necessarily lead to an improvement in the quality of the services provided. A large proportion of public funds are channelled through private actors – including ‘Health Promoting Companies’ owned by multinationals and finance companies – that do notare not ensureing the money is spent as it should. For example, many regional hospitals and clinics face serious financial difficulties because they have not received an estimated US$2.6 billion from these companies.
Colombia has recently increased mproved increased the amount of maternity leave that women are legally entitled to take. However, this measure will mainly benefit the half of the workforce who are in formal employment – not the half who work in the informal sector. At least 48 percent of the workforce are in the informal sector – the majority of whom are women.
It is important to note that the index does not consider a number of factors which are critical to tackling inequality in Colombia. For example, the country is one of the most unequal countries in the world on access to land -and access to land is a key issue in the current peace process. The Land Agency, which is in charge of managing public lands and land access programs that provide land to landless peasant families, is set to have its budget cut by 55 percent in the next year. Similarly, despite millions of Colombians relying on agriculture for a livelihood, spending in thise area has been cut in the past year and is set to fall by a further 13 percent next year.
Finally, after the peace agreement was signed, murders and threats against social leaders are being used in an attempt to try and silence poor and marginalised communities that are fighting for their rights. According to the Ombudsman's Office, there were 343 murders of social leaders between January 2016 and August 2018 with the majority occurring in rural areas and the most remote regions.
Denmark prioritizes the fight against inequality more than most other countries. The sizeable taxes and transfers of the Danish welfare state are able to reduce income inequality by more than 40 percent.1 Through its strong commitment, Denmark has been able to achieve inequality levels that are among the lowest in the world.
But things are changing. For more than a decade, the historically low levels of inequality in Denmark have been skyrocketing. So large is the rise that only two other countries in the Organisation for Economic Cooperation and Development (OECD) have had a bigger increase in income inequality over the past ten years.2 By one measure, the gap between the rich and poor grew by almost 20 percent in the last decade.3 There are two main causes for this alarming rise in inequality.
First, the Danish economy is increasingly developing in an unequal way. While economic growth was relatively evenly distributed between the 1980s and mid-2000s, the OECD notes that growth in Denmark has since “tended to benefit relatively more the upper-half of the distribution”.4 This is confirmed in income statistics, which shows that the average CEO in the private sector in Denmark has increased their salary by 60 percent over the past ten years, while low-income workers and people on unemployment benefits only saw an increase of 34 percent and 26 percent respectively.5 The large gaps in salaries are compounded by the fact that the average Danish CEO earns more than 13 times more from investments, interests and other forms of income from wealth annually than the average low-income worker.6
Second, just at the time when it is needed the most, government has systematically weakened redistributive policies meant to address this widening inequality.7 Six of the seven largest economic reforms in the period from 2012 to 2016 have increased income inequality, according to figures from the Danish Ministry of Finance.8 Just one of the most recent reforms - intended to encourage people back into work by cutting their monthly benefits - is estimated to have increased the number of children living below the poverty line by more than 25 percent in a single year.9 The Danish tax system has also been reformed in ways that increase inequality. For example, reforms have reduced the number of people paying the top income tax rate by half between 2008 and 2016.10 A review of the last 15 years of tax reforms in Denmark shows that the richest 1 percent have gained almost €13,000 in additional annually income, while the poorest 10 percent only received an additional €120.11
Denmark’s position as the world’s most committed country to reduce inequality is a reminder of the strength of policies and programmes enacted in decades past. But as the experiences from the last ten years demonstrate, these commitments are being rapidly abandoned, and inequality is rising fast. Without an urgent re-commitment to reduce inequality, Denmark is unlikely to top the index for long.
2 This is out of comparison of 29 OECD countries for the period of 2004-2013, and looks at the development in the GINI-coefficient in disposable income. Only Sweden and Australia have outpaced Denmark in income inequality growth. See LO, 2016, page 2: https://lo.dk/wp-content/uploads/2016/12/ny-indkomstulighed.pdf
3 See the OECD database on Income Distribution and Poverty, Palma ratio, Denmark 2005-2015: https://stats.oecd.org/viewhtml.aspx?datasetcode=IDD&lang=en
4 OECD, 2016, page 6 : https://www.oecd.org/denmark/Inequality-in-Denmark-through-the-looking-glass.pdf
7 OECD, 2016, page 6 : https://www.oecd.org/denmark/Inequality-in-Denmark-through-the-looking-glass.pdf
8 Ministry of Finance, 2015, page 3: https://www.ft.dk/samling/20131/almdel/fiu/spm/303/svar/1241012/1514636.pdf
9 Arbejderbevægelsens Erhvervsråd, 2018, page 2: https://www.ae.dk/sites/www.ae.dk/files/dokumenter/analyse/ae_kontanthjaelpsloftet-oger-antallet-af-fattige-born-i-hele-landet.pdf
10 Statistic Denmark, 2017: https://www.dst.dk/da/Statistik/bagtal/2017/2017-08-10-FAKTA-tre-tal-om-topskat#
11 Arbejderbevægelsens Erhvervsråd, 2016: https://www.ae.dk/analyser/15-aars-skattereformer-har-tilgodeset-de-rigeste
A pesar de ser uno de los países punteros en crecimiento económico de América Latina durante las últimas dos décadas, y de liderar actualmente las proyecciones de crecimiento económico en 2018, República Dominicana presenta importantes retos y desafíos para reducir la desigualdad. Este hecho se expresa en un débil compromiso político del gobierno dominicano con incrementar el gasto social, con la falta de progresividad de su sistema tributario y en una legislación laboral que no promueve lo suficiente los derechos de los/as trabajadores en general y los derechos de las mujeres en particular.
Los incrementos interanuales en partidas de gasto social son insuficientes y no borran la deuda social acumulada a la población. La evidencia del CRII 2017 muestra que RD hace menos de la tercera parte del esfuerzo necesario para garantizar un gasto social en salud, educación y protección social que contribuya significativamente en reducir en la desigualdad (gini), la cual lleva dos años consecutivos incrementándose. Es decir, pese a liderar el crecimiento económico en LAC, la desigualdad lejos de disminuir, aumenta.
La estructura tributaria no genera los suficientes ingresos al fisco, y los recursos que se generan descansan sobre una carga fiscal indirecta e injusta para sectores empobrecidos y de clase media. A esto se le suma una política discrecional de multimillonarios privilegios fiscales a élites económicas y allegados políticos, que van en detrimento del resto de la población. RD hace menos de la mitad del esfuerzo requerido en materia tributaria, constituyéndose en uno de los principales obstáculos para su desarrollo y garantía de derechos.
Por otra parte, la garantía y respeto al derecho de asociación laboral, la protección laboral para mujeres trabajadoras y salarios mínimos justos son rezagos de primer orden en materia de derechos laborales, ubicando a RD entre los peores lugares de la región LAC.
El Pacto Fiscal, previsto en la ley 1-12 de Estrategia Nacional de Desarrollo, está pendiente de iniciarse desde hace tres años y es la puerta de entrada para corregir estas desigualdades y garantizar justicia fiscal.
In English: (Please check for any ¨spelling adjustments¨)
Despite being one of the leading countries in economic growth in Latin America and the Caribbean (LAC) during the last two decades, and currently leading the projections of economic growth in 2018, the Dominican Republic (DR) presents important challenges in inequality reduction. This fact is expressed in a weak political commitment of the Dominican government to increase social spending, alongside a lack of a progressive tax system. Ultimately, the legislation does not promote the rights of workers (generally speaking) nor the rights of women workers in particular. As of now, around 30% of the Dominican population lives under the poverty line, whilst the gini Index sits at 40.
The inter-annual increases in social expenditure items are insufficient and do not erase the accumulated social debt to the population. The CRII 2017 evidence shows that the DR makes less than a third of the effort necessary to guarantee social spending on health, education and social protection that contributes significantly to an inequality reduction (gini), which has increased for two consecutive years. That is, despite leading the economic growth in LAC, the inequality index is far from decreasing, it’s actually increasing.
The tax structure does not generate enough revenue for the Dominican Treasury and the resources generated are the result of an indirect and unfair tax burden for impoverished and middle class sectors. Additionally, a discretionary policy of multi-millionaire fiscal privileges to economic elites and political associates, which are detrimental to the rest of the population, is “lawfully” implemented. DR makes less than half of the effort required in tax matters, constituting one of the main obstacles to its development and the guaranteeing of rights.
On the other hand, the guarantee and respect for the right of labor association, labor protection for working women, and fair minimum wages, are lagging in terms of labor rights, placing the DR amongst the worst places in the LAC region.
The "Fiscal Pact", foreseen in Law 1-12 of the National Development Strategy, has been pending for three years. We believe that this is the gateway to correct these inequalities and guarantee fiscal justice to its citizens.
France has a long history of strong public services and redistributive policies. In the aftermath of World War II, the French government launched a series of measures to create safety nets for the poorest citizens, including the creation of a universal healthcare system, free compulsory education and employment benefits. These measures were financed by redistributive tax policies including personal and corporate income taxes. Today, that so-called ‘French social model’ is being increasingly challenged by policy-makers.
France’s ranking of 22 on tax reflects an increasing reliance on regressive tax measures such as the Contribution sociale généralisée (CSG) which is collected on workers at a single rate regardless of their income. The government is also cutting progressive taxes – for example the corporate income tax rate was cut from 33.3 percent to 28 percent in 2017 and will be cut further back to 25 percent in the coming years. The abolition of the wealth tax and the creation of a flat tax on capital assets as part of the 2017 tax reform1 is not reflected in this year’s Index but is likely to push France further down the ranking in the next few years. A recent report from the World Inequality Database reveals that the effective tax rate of the richest 10 percent of the population in France decreased in 2018 for the first time since 19902. This reflects the fact that tax is no longer perceived as a redistribution tool but as a way of attracting investment. As a result, France scores particularly low on the tax progressivity sub-indicator (ranking 82) well behind the United States (ranking 56).
The impact of the tax reform on spending on public services is yet to be reflected in the Index. France’s third place ranking on this indicator is largely due to the fact that 43 percent of its national budget is dedicated to social protection (e.g. pensions and social security). This strong safety net reduces inequality. However, as less taxes are collected, public services such as healthcare and education are increasingly under pressure to perform with less funding. The universal coverage of social security and pensions are regularly challenged by policy-makers despite deep support from French citizens across the political spectrum. With less affordable education and healthcare, France’s poorest are first in line to be threatened by spending cuts. France could therefore lose its leadership and tumble down in the ranking on spending issues.
France ranks 22nd labour rights - far below Germany that comes fourth. However, France could easily move up in the ranking with an extension of the paternity leave that is currently limited to 11 days. Elsewhere in Europe countries such as Portugal offer 5 weeks paternity leave.
1 Oxfam France (September 2017), Réforme fiscale : les pauvres en paient l’impôt cassé, http://www.oxfamfrance.org/actualites/justice-fiscale/reforme-fiscale-pauvres-en-paient-limpot-casse
2 WID working papers (September 2018), Inequality and Redistribution in France, 1990-2018: Evidence from Post-Tax Distributional National Accounts
Even though Germany ranks second in the Index it faces a number of obstacles in reducing inequality.
Germany ranks among the top ten in the social spending pillar. But a deeper view reveals that it is a laggard in education spending, ranking 142nd in a list of 157 countries. There is serious lack of investment in teachers and education infrastructure in the country and huge inequalities in education outcomes. As a result, Germany has one of lowest rates of social mobility out of the 34 countries that make up the Organisation for Economic Cooperation and Development (OECD).
Germany fares well on tax overall, but below average with regards to the progressivity of the tax structure. A recent in-depth study concluded that the overall tax structure, including social security contributions, places a relatively large burden on those with the lowest incomes and rewards those with the highest earnings.
In the labour pillar Germany fares particularly well on legal protection for women workers. Two components stand out – the lengthy paid parental leave and equal pay provisions. However, the recently introduced law on equal pay is only applicable to workers in companies with more than 200 employees and therefore not accessible for large parts of the workforce. How much of a dent the law can make on one of Europe’s highest gender pay gaps - currently standing at more than 20 per cent - is yet to be seen. The recent introduction of a general minimum wage is much needed given the large low-pay sector in Germany.
These examples show that despite performing relatively well compared to the rest of the globe there are shortcomings in the government’s commitment to reducing inequality. There are two more insights, which the index does not cover either for methodological reasons or data limitations. First is the fact that inequality used to be significantly lower in the past. Germany had a more equal income structure however since the early 1990s income gains have predominantly gone to those earning more. In addition, two decades of regressive tax reforms have reduced the redistributive effect of the tax system resulting in rising inequality in disposable incomes. Secondly, Germany ranks among the most unequal countries in the EU with regards to wealth inequality, and yet wealth taxes have not been collected since 1996.
Oxfam Germany – together with its allies in the civil society alliance “Reichtum umverteilen – ein gerechtes Land für alle!”- has called upon the German government for tax justice, to end tax evasion, for fair wages for women and men in Germany and globally, as well as for investments in education, health, social protection and care for all. Such interventions would show a much-needed deeper commitment to reducing inequality.
Ghana has experienced impressive economic growth over the past 20 years and has seen a significant decline in poverty - poverty levels have more than halved between 1992 and 2013. However, income inequality has been growing steadily for a number of years and are a serious threat to poverty reduction efforts. Oxfam estimates that just one of the richest men in Ghana earns more from his wealth in a month than one of the poorest women could earn in 1,000 years.
Oxfam identifies five key drivers of inequality in its 2018 report ‘Building a More Equal Ghana’ - some, but not all of which, are assessed by the Index.
Poor financial management. Ghana is facing a new debt crisis barely a decade after having significant amounts of debt cancelled. In 2017, 42 percent of government revenue was being allocated to debt repayments. This is more than the annual amount the government would need to pay for quality healthcare for all Ghanaians and to deliver on its promise to provide free healthcare for all by 2030. Meeting these goals would save the lives of 7000 new born babies and 1000 mothers a year.
Lack of availability and affordability of public services. Government healthcare spending is low and decreasing – from 10 percent of the total government budget in 2010 to 7 percent in 2017. Ghana’s universal health insurance scheme covers only four out of every ten Ghanaians – dropping to just 2 in every 100 for the poorest communities. Most people are still paying out of pocket for their healthcare - including for services which are supposed to be free - and many people struggle to access healthcare particularly in rural areas.
Work isn’t paying. 90 percent of population – including 45 percent of men and 55 percent of women – work in the informal sector where income is low, jobs are insecure, and basic benefits such as sick pay, maternity pay, or a pension are non-existent. Even those lucky enough to secure a job in formal sector struggle to survive on wages that have failed to keep pace with the cost of living. The Living Wage Alliance estimate that at least 20 percent of working Ghanaians are poor. By contrast, the basic salary and allowances of a Minister of State is about 103 times the monthly minimum wage set by the government in 2017
Gender inequality. Ghanaian women are systematically discriminated against in all areas of society. Women account for just 11 percent of the 275 seats in Parliament and just 6 percent of Ghana’s wealthy elite. Women are half as likely to own land or their own home. They are concentrated in the lowest paid and most vulnerable jobs – earning just 67 percent of the average male hourly income in 2013. Women also do approximately 10 times more unpaid care work then men which restricts their ability to earn a living.
Corruption and political capture. A small but growing number of the economic and political elite are using their power and wealth to ensure that government policy works in their favour. Corruption and mismanagement is rife with an estimated GHS 5.9 billion (US$1.5 billion) of public money reported missing or misused between 2012 and 2014.
Oxfam is calling on the Ghanaian government to tackle the five key drivers of inequality: improve public financial management; use public spending to reduce inequality; create decent work with good wages; put women’s economic empowerment at the heart of policy making; and make governance work for everyone.
In Guatemala, the tax scheme is highly inefficient to reduce inequality. In fact, inequality increases after the payment of taxes. This is due to a regressive tax system, in which indirect taxes have much more weight than direct taxes on labor or capital. The fiscal privileges enjoyed by the most powerful industries (agroindustry, extractive industries) also add up to a high injustice tax system that greatly benefits the richest people. Finally, we must highlight the excessively low level of tax collection - the lowest percentage in Latin America, currently reaching 10% of GDP, which does not meet the modest goals of 12% of the Peace Accords (signed in 1996) and barely constitutes half of the percentage included in the SDGs (20%). Consequently, social investment related to GDP is also the lowest in the Americas. Social protection is practically absent: only around 30% (specifically 31.6%) of the working force is enrolled in the Guatemalan Social Security Institute (which also only covers the worker, and with the exception of maternal-child health not his/her family). This figure drops to 19.3% in rural areas; the program of conditional cash transfers has been dismantled in the current administration; indexes of education coverage have been falling in recent years (i.e. enrollment in Primary School from 98.7 to 77.5) and those of health are stagnant.
Although in Guatemala the minimum wage amounts to Q. 2,742.37 - and with the bonus of Q 250 adds almost Q 3,000 per month (equivalent to USD 400) -, a higher value than in many other countries in the region, it is important to highlight two facts. First, this minimum wage does not cover the Basic Basket Food (Q. 3,552.32 as of January 2018), and is far from reaching the Extended Basket (Q. 8,202.08), both calculated for a family with an average of 4.77 members. To cover the Extended Basket (which covers basic needs such as food, education, health, housing, clothing, basic services) for 4.77 people, almost 3 minimum wages are required.
Second, the real salary differs a lot from the minimum wage. A formal minimum wage contemplates the amount mentioned above (Q. 2,997), Social Security contribution and Law benefits. However, only 31.6% of the working population is enrolled in Social Security; 32.7% receives ‘Bono 14’ (17.4% in rural areas); 31.7% bonus (16.5% in the rural area); and only a little more than half of the working population (53.1%) enjoys vacations.
In terms of income and real wages, 20% of the working population earned an average of Q.340.00 per month, the second quintile an average of Q. 878; the third Q.1,452; and the fourth Q 2,439. Only the fifth quintile achieves an average income higher than the minimum wage (Q.5,406.00), which shows that about 80% of the economically active population receives an income lower than the minimum wage. This shows that the minimum wage is still a little representative number for the national salary reality in Guatemala. Informality (69% of the population employed at the national level, 80% in rural areas) - is much more precarious even than the already precarious minimum wage. Finally, gender inequality can be observed: women perceive an average income between 20-30% lower than men (all data from Employment and Income Survey 2017-3).
Ireland has the highest level of income inequality in Europe Union (EU) before social transfers (e.g. unemployment benefits, housing allowances) are taken into account. However, as Ireland has one of the highest rates of social spending relative to total government spending in the world, Ireland's net level of income inequality is around average for the EU, and the country ranks 13 out of 28 European countries in the Index.
The most up to date figures show that wealth in Ireland is rather more unequally distributed than in the Eurozone as a whole. The top 10 percent own 53.8 percent of the wealth and the top one percent own 15 percent of the wealth in Ireland. The poorest half of the population own little or no wealth in Ireland.
Despite doing well on spending overall, Ireland has very low education spending (ranking 109 out of 157 countries on this indicator). Ireland's respect for trade unions and for women in the work place is reasonable, but its minimum wage is low relative to living costs.
However, its Ireland’s tax system which really pulls the country down the rankings - Ireland ranks at 99 of 157 on tax. Ireland has a high VAT rate which negatively impacts poorer households, and it has several harmful tax practices including low corporate tax rate, incentives and loopholes that benefit large corporations and richer households in the country – but which deprive the Irish government and governments around the globe of much needed tax revenue.
Extreme inequality is out of control in Kenya. Just 8,300 people own more wealth than the 44 million people who make up the rest of the Kenyan population. Tackling inequality could help lift millions out of poverty, secure sustainable economic growth and bring the country together.
Kenya comes about half way down the ranking for sub-Saharan Africa in the Index – ahead of Uganda but behind Tanzania.
Kenya does relatively well on education spending compared to other countries in the region. Its health spending is a lot lower, but this is in part because a proportion of health spending is devolved to local government level, and in this year’s Index we have not been able to adequately capture this. The President has made Universal Health Coverage one of his big four priorities and sustaining increased investment in health care will be vital to make this happen.
The Kenyan government is facing a fiscal crisis caused by high levels of debt. This financial year the Government of Kenya will spend almost 50 percent of its revenues servicing its debts. Faced with this fiscal crisis, the recent 2018/19 budget proposed increases in taxation. Some of the initial proposals, which would pushed up taxes for richer Kenyans (e.g. quadrupling capital gains tax, and a new top rate of income tax) were dropped in advance of the budget. However, the removal of the VAT exemption on fuel, which the IMF had identified as a core condition of their support, did go ahead despite a major public outcry. Whilst fuel subsidies like this are regressive they are still of vital importance to the poor who have seen minibus fares increase by as much as 50 percent as a result.
The Government of Kenya needs to balance its books on the backs of the richest, not the poorest, to raise the vital revenue needed for reducing inequality and tackling poverty. Oxfam works with partners in Kenya to put pressure on the Kenyan Government to do this. In our recent report, Taxing for a More Equal Kenya, Oxfam in Kenya has proposed a five-point action plan to tax and spend effectively, which would enable the government to ensure a more equal and prosperous future for all Kenyans.
President Moon Jae-in took office in early 2017, promising to tackle inequality in South Korea. The country’s inequality levels have been increasing rapidly. Over the past two decades the income growth of those at the bottom has stagnated while the top 10 percent have seen their incomes grow by six percent each year, so that they now lay claim to 45 percent of national income.
To pursue a reduction in inequality and an increase in inclusive growth, President Moon has acted in all three areas measured by the Index. He has committed to dramatically increasing the minimum wage and in his first year in office has delivered, increasing it by 16.4 percent. He has also increased taxation on the most profitable and largest corporations in South Korea, raising their corporate income tax (CIT) rate from 22 percent to 25 percent, which is expected to raise revenues of US$2.3 billion annually. He has also raised income tax for the highest earners, a move that had the support of 86 percent of Koreans. Finally, he has embarked on a programme of expanded welfare spending. South Korea has some of the lowest welfare spending in the Organisation for Economic Cooperation and Development (OECD). President Moon has increased spending, including provision for a universal child support grant.
In an address to the UN General Assembly on 21 September 2017, President Moon stated: ‘As of now, my Administration is pursuing bold measures to change the economic paradigm in order to deal with economic inequalities that stand in the way of growth and social cohesion.... This is what we call a “people-centered economy.”
Numerous inequalities are threatening to further divide an already fractured nation by broadening the gap between the rich and poor and ignoring the voices of ethnic minorities and women.
Economic growth is not enough to create a more equal Myanmar and make progress towards the Sustainable Development Goals (SDG). Strengthening tax systems, increasing public spending on services for all, improving worker’s rights and deepening democracy could significantly reduce inequalities.
46% of Myanmar’s population are living below or just above the poverty line – the highest poverty rate in ASEAN. For most people, monthly income is not sufficient to cover basic necessary expenditures. At the same time, Wealth X reports Myanmar has the fastest pace of growth of ultra-high-net-worth individuals anywhere in the world. While data on wealth is limited, the difference in lifestyle is stark. To rent the most exclusive properties in Yangon for one month, a worker on the minimum wage would need to work for 40 years.
Myanmar is the most ethnically diverse country in the ASEAN region with many ethnic groups which are formally recognized, and others which are not. This diverse ethnic and cultural make-up is a proud part of Myanmar’s history, but the reality is that ethnic minorities are politically under-represented and experience higher levels of economic and social inequality, poverty, discrimination and conflict.
Women are earning 10% to 30% less than men and are more likely to work in low payed positions, with no access to benefits such as sick pay, maternity leave or pensions. Fear for women’s safety when they are away from the home is widespread and a key factor in the high degree of gender inequality of participation in the workforce. Of 1536 Members of Parliament, only 10% are women – the lowest rate of women participating in politics in ASEAN.
Poor public service provision is deepening the divide. 80% of health expenditure is paid out-of-pocket by healthcare users and when people’s access to healthcare depends on whether they can pay, the health of the poorest people is put at risk. While education is officially free in Myanmar, the hidden and informal costs remain prohibitive for many families and one in 10 children aged between five and 17 is working. The richest people can choose to pay for exclusive private healthcare and education in Myanmar or abroad.
The Government has taken big steps to regain control of national resources to support domestic resource mobilisation, but currently, the country is still losing revenue through illicit trade and tax avoidance. Myanmar has been ranked 83rd of 89 countries in the 2017 Resource Governance Index and has one of the largest underground economies in the world – draining domestic resources, facilitating crime and corruption, and exacerbating inequality. Some of the super-rich in Myanmar have been found to use complex offshore structures to manage their wealth, raising concerns about tax evasion. State Owned Enterprises remain in need of significant reform.
Myanmar is not simply a poor country, it is an unequal one. But this inequality is avoidable.
Despite being one of the most unequal countries in the world, its high Index score reflects the commitment of the Namibian government to reducing inequality, particularly through its high levels of social spending (with secondary education free for all students) and some of the most progressive taxation policies.
Namibia’s commitment has been recognized by economist Joseph Stiglitz and others and, although inequality remains very high, it has been continually reducing inequality since 1993 and is no longer the world’s most unequal country.
Since the first edition of the Index, the government has increased spending on social protection and has also increased the minimum wage substantially, and a new study has shown that its taxation and spending policies are reducing inequality significantly.
Known as a progressive country that leads efforts against poverty and inequality, the Netherlands has lost its position as a frontrunner in recent years.
The Netherlands has slid down the rankings in the second edition of the index in large part because of a new indicator on harmful tax practices.
The Netherlands has a reputation as a corporate tax haven - facilitating large multinational corporations shifting their profits from third countries (including developing countries) to places where corporate income tax is extremely low. This enabling environment for tax avoidance contributes to rising levels of extreme inequality in rich and poor countries around the globe, deepening poverty and robbing national treasuries of resources desperately needed by developing countries for investment in public services. The Netherlands could take concrete measures to stop being a corporate tax haven, including; implementing stronger rules against profit shifting to (other) tax havens; stop providing tax deals for corporations that leave corporate profits (largely) untaxed (so-called ‘Excess profit rulings'); revert legislation that favors large corporations with lower tax rates (Innovation box); and support steps at a European and global level against corporate tax competition between countries.
The Netherlands has also recently announced the elimination of a 15 percent tax on dividends; and a phased reduction of the corporate tax rate from 25 percent to 22.25 percent by 2021 – measures which will reduce tax revenues from companies and the wealthiest in society and accelerate the global race to the bottom on corporate tax . In the long run these measures are likely to lead to a cut back on the essential spending needed to reduce inequality and poverty in the Netherlands; or a shift in the tax burden to less wealthy sections of society through a hike in other taxes such as value-added tax (VAT).
On a more positive note, we are now seeing a public debate by both politicians and civil society on the role played by the Netherlands as a corporate tax haven, and a significant push for fairer tax practices from large sectors of society.
Besides much-needed changes in fiscal policies, a number of other areas are in need of reform. There is still a considerable wage gap reported between men and women, reflecting structural gender inequality in the labor force ; there are increasing concerns about inequality in education, especially for students with a migrant background, but also for students from lower-income households ; and the Netherlands comes second (only behind the US) on the wealth inequality ranking by Forbes, with a staggering 68 percent share of wealth owned by the richest 10 percent of households .
Among the positive highlights of the CRI, the Netherlands has relatively high spending levels on healthcare and social protection compared to other countries. And, as a result of positive government policies, The Netherlands has a relatively low level of income inequality and a relatively high level of gender equality.
In summary, despite the general positive score achieved by the Netherlands, there is much that can be done by reverting policies and laws that have a negative economic and social impact on its citizens and beyond its own borders.
Nigeria has the unenviable distinction of being at the bottom of the Index for the second year running.
Its social spending (on health, education and social protection) is shamefully low and stagnating, which is reflected in very poor social outcomes for its citizens. One in 10 children in Nigeria does not reach their fifth birthday, and more than 10 million children do not go to school. Sixty percent of these are girls.
In the past year Nigeria has seen an increase in the number of labour rights violations. The minimum wage has not increased since 2011.
And there is still significant potential for Nigeria to raise and collect more tax, so it scores very badly on this aspect too. There have however been very recent improvements in this area in 2018, which will show up in next year’s CRI.
The IMF has given clear advice on the importance of tackling inequality, referring to Nigeria’s score in the CRI Index. The president of the country has also said that tackling inequality is important, as inequality leads to political instability.
These figures relate to the Government of Israel's national budget, tax system, labour conditions and gender equality and related laws that the State of Israel applies to its citizens. It must be noted, however, that Israel is the occupying power in the Occupied Palestinian Territory (OPT). In this capacity, Israel maintains various degrees of control over the occupied Palestinian population. Those under complete Israeli control in Area C of the West Bank do not benefit from the protections of Israel’s labour laws whilst Israeli settlers unlawfully residing in the same geographic locations do. The key drivers of inequality and injustice for Palestinians in the OPT are the protracted occupation, recurrent conflict and the systematic and ongoing denial of Palestinian rights. While this Index measures fairness of taxation, levels of social spending and work conditions, it is not designed to capture elements related to a situation of military occupation. The results of Oxfam’s “Commitment to Inequality” Index as they relate to Israel’s control of the OPT should be interpreted in the light of these facts.
Occupied Palestinian Territory
The figures are related to the parts of the Occupied Palestinian Territory (OPT) that fall under the jurisdiction of the Palestinian National Authority (PNA). The OPT refers to the Palestinian territory occupied by Israel since the 1967 war: the Gaza Strip and the West Bank, including East Jerusalem. The OPT is recognised as one territorial entity under international law. The key drivers of inequality and injustice for Palestinians in the OPT are the protracted occupation, recurrent conflict and the systematic as well as ongoing denial of Palestinian rights. While this Index measures fairness of taxation, levels of social spending and work conditions, it is not designed to capture elements related to a situation of military occupation. It should be noted that the PNA and Palestinian economy remain heavily constrained by the ongoing occupation. Taxation in the OPT is subject to the Oslo Accords (Protocol on Economic Relations or Paris Protocol) and the PNA is not fully sovereign in determining tax policies as they pertain to indirect taxation, the majority of which are collected by the occupying power and transferred to the PNA. However, the PNA retains power to levy and collect direct taxes under its authority and Oxfam partners are seeking to encourage the PNA to address issues of tax inequality where it can, within the constraints outlined above. The results of Oxfam’s “Commitment to Inequality” Index as they relate to the OPT should be interpreted in the light of these facts.
Ranked at 137 out of 157 countries on Oxfam’s 2017 Commitment to Reduce Inequality (CRI) Index. Pakistan is among those countries where the efforts to combat the scourge of inequality has been abysmal. In 2017, Pakistan recorded its highest growth rate in decades1 but investments in education, health care and social protection were among the lowest in South Asia and the regressive tax system, highly dependent on indirect taxation, continued to burden those earning less.2 Pakistan, was also ranked the second-worst in the world for gender equality in the World Economic Forum’s (WEF) Global Gender Gap Report of 2016 3. Pakistani women own less than three percent of land and are mostly engaged in unpaid care work (rural and urban). Women’s participation in the formal labour force at 25 per cent is the lowest in South Asia 4 and when employed they are paid 23 per cent less than the equivalent task undertaken by men5. There is no national level anti-discrimination law, sanctioning equal treatment on the ground of race, religion, caste, creed, marital status, disability, trade union membership, residence or place of birth in employment matters. Anti-harassment legislation was enacted eight years ago, but the menace continues unabated in public and private sectors.6 Additionally, wages that are paid for work do not meet the minimum wage determined by the Government of Pakistan let alone the living wage.
Several laws govern Pakistan's labour market such as the colonial-era Factories Act 1934, but most are outdated and provincial labour departments, tasked with enforcement of employment standards, such as minimum wage, hours of work and public holidays, only act on complaints from designated trade unions. Less than one per cent of the labour force is unionized as unions are highly discouraged by larger companies. Women constitute only 2 per cent membership of the trade unions in Pakistan, and this figure does not include the informal economy of which more than 70% are women. 7Moreover, many large companies outsource production to third-parties which do not meet the minimum standards for labour protection.8
Some progress has been made in strengthening social protection programs to reduce poverty. But expenditure on social safety nets, excluding subsidies and provincial programs, represent 0.54 per cent of the GDP, well below the average in South Asia and other emerging markets. Education and health outcomes are weaker than then South-Asia average and social spending in these areas is also below the emerging markets’ average. Similarly, gaps in education and health outcomes between genders and the richest and the poorest quintiles are sizable.
Meanwhile, elections in July 2018 ushered first-time Prime Minister Imran Khan’s Pakistan’s Tehreek-e-Insaaf (PTI) into government at the center and in two provinces. PTI’s election manifesto and the Prime Minister’s maiden address to the nation promises efforts to tackle inequality, expanding the tax net, bringing in progressive taxation and making greater investments in health and education. 9 As the ruling party was the main petitioner for the Panama Leaks case, the verdict for which removed former prime-minister Nawaz Sharif from office, their election campaign was centered around tackling financial corruption. 10 In office, the new prime-minister has announced that efforts will be made to ensure elites pay their fair share of taxes. However, as the new cabinet struggles to grapple with massive financial liabilities and a broken tax system11, whether they will be able to deliver on promises is to be seen.
Poverty in Senegal, one of West Africa’s main economic hubs, has fallen in recent years however rising inequality threatens to undermine this progress.
Senegal ranks 85 out of 157 on tax. It has a relatively progressive tax system on paper, with a 30 percent corporate tax rate, a 40 percent top personal income tax rate, and pro-poor VAT exemptions for food. Tax collection has also increased sharply in recent years. However, Senegal remains largely dependent on consumption taxes for its tax revenue - 45 percent of tax revenues come from VAT which tend to be disproportionately paid by the poorest, compared to just 30 percent from income taxes. This means the tax system is relatively unprogressive.
The country ranks less highly (103 out of 157) on social spending. Spending on education and social protection are both fairly high. For example, three percent of GDP is spent on social protection and the country has one of the largest safety net programmes in Africa, covering 30 per cent of its poorest households and this has been growing fast in recent years. However, Senegal falls down on healthcare spending where the government spends just US$19 per person per year or just 1.5 percent of GDP – well below the 9 percent recommended by the World Health Organisation. As a result, out of pocket health costs for the poor are very high, exacerbating inequality.
Senegal does poorly on labour ranking at 119. According to the Global Labour University, its trade union laws fall well short of International Labour Organisation standards, and there are frequent violations of union rights. It scores better on the laws it has on paper to provide non-discrimination and equal pay for women, and to protect them against rape and sexual harassment. But it performs poorly on parental leave - providing only 99 days - and on minimum wages.
South Africa is the highest ranked country from the global south in the Index, however it remains the most unequal society in the world and the gap between rich and poor continues to grow.
This demonstrates that tackling inequality requires action beyond the scope of the index. The index assesses some of the actions that governments can take to tackle inequality - it does not consider actions that governments can take to prevent inequality in the first place. For example, the Index does not consider land distribution – a key issue fuelling inequality in South Africa and elsewhere.
South Africa has a relatively progressive tax system – ranking third in the world. It ranks quite poorly on labour rights (65) in part because it doesn’t yet have a national minimum wage - although there are plans to introduce one in 2019.
South Africa’s ranks a relatively good 34 on social spending. However, while the country excels in its expenditure on healthcare provision (3.62 percent of national income is spent on healthcare) healthcare outcomes are far worse than countries that spend much less. For example, South Africa’s life expectancy is just 64 years old and under five mortality rates of 43 per 1000 live births. By comparison, Malaysia spends just 1.9 percent of its national income on healthcare, yet it has a life expectancy of 75 and under five mortality rates of just 7 per 1000 live births.
The difference arises because South Africa’s health care spending is highly regressive. Nearly half of the country’s health care budget is used to subsidise a private healthcare system that reaches only 16 percent of the country’s population, while the other half is meant to cater to the remaining 84 percent of the population constituting 42 million people. Secondly, the limited resources that have been spent on the public healthcare system have been squandered because of corruption - with healthcare functions outsourced to the private sector for private gain. Therefore, while public healthcare is provided for free, it is severely underfunded and lacks the staff, equipment and medicines that are needed to provide a decent quality of care – particularly in rural areas.
In addition, the Competition Commission’s Market Inquiry into Private healthcare provision found that the deregulation of the private healthcare sector has resulted in a highly concentrated sector that is engaged in highly abusive market practices and corruption. As a result, the range and depth of services on offer privately has been cut – particularly outside of urban centres. The cost to the government and individuals has also skyrocketed to such an extent that even the middle class are unable to afford the out of pocket expenses associated with private healthcare.
When compared to the other OECD and high-income countries, Spain ranks below the middle of the list (20th position among 35 OECD countries and 22nd position among the HIC). Considering the three different pillars of the CRI, the disappointing performance of Spain is mainly explained by a labour market unable to fairly share the income and opportunities of economic dynamism. For the last years, Spain has been one of the fastest growing economies in the European Union, and yet, the lion share of this dynamism has ended up in the hands of the few. Despite of economic growth, dynamism and the recovery of employment, improvements in the social conditions of the people most affected by the crisis have barely been noticed. Between 2007 and 2016, the economic gap between the richest and the poorest has increased: while the poorest 10% saw their share of national income diminish by 17%, the richest 10% saw it increase by 5%, and the top 1% by 9%. Between 2013 and 2015, when Spain resumed economic growth, 29 out of every 100€ from economic growth went to the top 10%, while only 8€ ended up in hands of the poorest 10%. Economic recovery has favored the richest four times more than the poorest.
Spain still has one of the highest unemployment rates among the OECD countries (mainly among the youth) and the jobs created are neither of quality nor with fair wage levels. Moreover, compared to other European countries, the social protection system in Spain is less efficient in fighting against inequality and poverty. It is heavily based on contributory payments favouring the better off workers against the young people and women, as these are the ones most affected by temporary and precarious jobs. Social assistance is underdeveloped and underfunded, and, as a result, more than half million households in the country do not get any kind of income.
Additionally, the tax system does not seem to fulfill its redistributive mission. Spain is clearly less efficient than other EU countries in terms of tax collection, which directly undermines the level of investment needed in social policies, especially to better reach those left behind, also the ones who suffered most from the economic crisis. The analysis shows that current tax policies are not progressive enough and they would require a substantial reform to rebalance the extreme low tax collection levels on wealth and capital compared to labour and consumption. The tax burden on families has clearly increased with respect to the pre-crisis levels, while the contributions from large corporations remain at levels well below, despite scoring historic profit levels. These needs are clearly identified and can be addressed by increasing the effective taxation rate from large corporations, making PIT more progressive as well as increasing the resources levied by wealth taxes. Additional efforts and political will is needed to close the gaps on tax dodging and untaxed incomes.
Timor-Leste, one of the world’s youngest nations, has made great strides in peace, development and reducing poverty. But with 41.8% still in poverty it is one of the poorest countries in the region.1 While government has taken steps through a social protection system and gender-based budgeting, there is emergent inequality between rural and urban populations. Timor-Leste relies heavily on its petroleum fund funding (73% of the 2017 state budget2). With oil and gas reserves expected to finish in 2026, the government has been criticised for petroleum fund withdrawals above the estimated sustainability income.3 2017 also saw a political crisis with failure to form a majority government freezing the State Budget. This was resolved with new elections in May 2018. These factors highlight the complex environment and have contributed to Timor-Leste returning to the World Bank Groups’ Harmonized List of Fragile Situations FY2019.
As part of Oxfam’s goal of creating a just world without poverty, Oxfam International has developed the Commitment to Reducing Inequality (CRI) Index. It compares 157 countries on government action in three areas critical to reducing inequality: social spending, tax and labour rights. In the 2018 CRI Index Timor-Leste scored 132 out of 157.
Within the report Timor-Leste ranked in the bottom 10 countries for social spending (147 out of 157). In the 2017 State Budget allocations education was only 7.7%, health 4.8%, and social protection 10.5%. This is low compared to progressive countries in Asia and even more so internationally. While government committed to prioritize investment in health and education in 2016, this commitment was not sustained in 2017 which saw budget reductions.4 Spending on large infrastructure projects accounted for almost twice of social spending in 2017. The unsustainable use of the petroleum fund, issues of transparency and over focus on infrastructure is further enhancing the benefits for few. Instead, focus is needed on the majority of people, living in rural and poor communities, through increased agriculture and social spending.
Timor-Leste scored 128 out of 157 for tax. Low tax collection rates and a fixed rate tax system is inherently unequal. A progressive tax system, i.e. lower tax rates for lower earnings and higher tax rates for higher earnings, would support greater equality in tax contributions while increasing collection of tax revenue. Timor-Leste has committed to ongoing fiscal reform, an opportunity to develop a progressive tax system, enhance tax revenue and collection, and prove commitment to reducing inequality.
Timor-Leste scored 107 out of 157 for labour rights. Pursued efforts on progressive labour and gendered policies and a minimum wage increasing faster than GDP indicates strong attention to support enhanced earnings for all workers. Progress towards a fair living wage sufficient to live on5 will support greater equality in Timor-Leste.
The 2018 VIII Government of Timor-Leste has an opportunity to further address inequality. Sustained efforts on progressive policies in social spending and enforcement of their implementation will contribute to effective and inclusive development for all citizens.
Since the early 1990’s Uganda has experienced rapid economic growth – however the benefits of this growth have largely accrued to a minority of Ugandan’s. Inequality levels in the country are high and growing with those at the bottom are on a downward poverty spiral while those at the top are on an upward trend. There are also regional inequalities – with northern Uganda experiencing poverty levels eight times higher than central regions.
Oxfam in Uganda’s inequality report, ‘Who is Growing,’ identifies the lack of investment in ‘pro-poor’ sectors such as agriculture, education, health and humanitarian response as a key driver of inequality alongside poor governance, a culture of corruption and discrimination against women. For example, 70 percent of Ugandans are employed in agriculture – many of them poor women – yet the government, spurred on by foreign investors, has spent more on the service industry which employs relatively very few.
Uganda ranks a poor 131 on social spending. While the government’s latest budget framework paper highlighted the need to invest in pro-poor sectors, and funding for health and agriculture has increased in recent months, the overall budget dedicated to these areas is still well below what’s needed. For example, only 7 per cent of the national budget, is dedicated to healthcare – despite the government committing to dedicate 15 percent of GDP to healthcare as part of the 2001 Abuja Declaration. The lack of public healthcare provision means the average Ugandan spends 40 percent of their income on health – leaving the poorest people with little to spend on food and other necessities.
Uganda also does badly on labour rights – ranking 140. Half of Ugandan women are employed in the three lowest paying sectors of the economy (agriculture, domestic work, mining and quarrying). And even in better paid sectors the gender pay is huge – for example women in working in the public sector earn 40 percent less than men. The situation is compounded by a minimum wage that has not been updated for 30 years.
Uganda does relatively well with a ranking of 47 on tax. However recent government initiatives including a tax on mobile money withdrawals and social media will hit the poorest hardest.
Oxfam in Uganda, together with our partners, is calling on the government to fulfil the right to equitable development enshrined under the Constitution, by increasing expenditure on health, agriculture and education and investing in growth beyond the service industry.
Despite a relatively good overall score in the global ranking the UK’s is distinctively average in comparison to other rich nations. The UK ranks fourth out of the G7 countries - behind Germany, France and Japan, and 10th out of 28 countries in the European Union.
The UK comes 27th on labour. Britain has relatively high employment standards, including protections for women and unions, and equal pay policies. However, many people who are self-employed or in precarious work are not covered by these provisions. The UK has more people in ‘insecure and vulnerable employment’ as defined by the International Labour Organisation than most countries in the Organisation for Economic Cooperation and Development (OECD), only behind US, Japan and Mexico. It also lags behind on parental leave due to very low statutory pay after the first six weeks. Action is also needed to tackle structural issues that contribute to national gender pay gap of 9 per cent.
The UK comes 19th on tax. The UK scores relatively well for policies to combat tax avoidance and profit-shifting. The index does not capture transparency, and so does not reflect positive commitments to introduce public country by country reporting for multinationals in Britain and to require the overseas territories to publish registers revealing company ownership – but neither does it reflect the wider role of the City of London and UK-linked tax havens in enabling tax avoidance by wealthy individuals and multinational companies. The UK scores poorly (99th) for how progressive its tax system is, due to the combination of high VAT, not very progressive personal income tax, and the low corporate tax rate of 19 per cent.
The UK ranks 15th on social spending. This high score is due to the UK spending above the OECD average on social protection (ranked 18th) and health (ranked 9th). Spending on education is below the OECD average – the UK ranks 120th on this measure.
Like all countries in the index, there is more that the UK should be doing to tackle inequality. Current policies are failing to bring income inequality down from the high level at which it has been since 1989. More needs to be done to improve job security and ensure fair wages. Many people in work are not earning enough to cover living costs. Housing costs, and who owns a home and who doesn’t, are leading to growing divisions between regions and generations. While the index measures housing benefits it does not include investment in social housing, which we know is an important factor in addressing this problem.
The Index looks at the UK as a whole and does not provide separate analysis for Wales, Scotland and Northern Ireland. In Scotland, positive steps are being taken to reduce inequality, including establishing a statutory Poverty and Inequality Commission, changes to income tax and social protection policy, and identifying wellbeing as a priority for the Scottish Government alongside sustainable and inclusive economic growth.
In Wales Ministers have set targets to create a more equal country. The Welsh Government has also set up a Fair Work Commission to ensure improvements to the quality of work and is undertaking a review of gender polices across all its departments.
The US is the richest country in the world yet it has the highest level of inequality among major industrial countries. This is leaving tens of millions of working people impoverished – especially women and people of colour. The US is the bottom ranking G7 country in the Index and is one of the worst performing countries in the Organisation for Economic Cooperation and Development (OECD).
This year’s tax scores do not take into account the 2017 tax reform. Prior to tax reform, the USA had a decent tax structure with low sales tax rates and a high corporate income tax rate relative to other rich countries. The US tax system did a relatively good job at decreasing income inequality. Its Achilles heel was tax collection, as numerous tax exemptions resulted in people and corporations paying taxes at a lower rate than the statutory rates. For example, the effective corporate tax rate for 2008 to 2012 was just 14 percent on the pre-tax net income – in contrast to the statutory rate of 35 percent. The 2017 tax reform is expected to worsen the USA’s score on tax structure, with an uncertain effect on tax collection.
Spending on education and health care is high in the US, but problematic due to inefficiencies and some massive inequalities in spending. For example, a 2015 report card on the financing of public education found that 15 out of 50 US states have a regressive structure for state-level education financing. The US ranks number one for public spending on health care as a proportion of total government spending, but Americans experience poor health outcomes, with life expectancy that ranks 31st internationally. 24.5 million adults under age 65 did not have health insurance in 2016, a number estimated to have risen by four million to 15.5 percent by March 2018 as a result of various policies rolling back the healthcare law passed during the Obama administration. Spending on social protection is low relative to other rich countries. Not surprisingly then, the US also ranks poorly in terms of the impact of social spending on reducing inequality compared to other rich countries.
In line with the historic discrimination against women and people of colour, labour policy in the USA is very inadequate. The federal minimum wage of $7.25 is well below the $10.60 per hour needed for a family of four to stay above the federal poverty line. The government has failed to raise the minimum wage since 2009, which (adjusted for inflation) is less than it was 50 years ago.
The USA is also one of just five countries in the world that do not require employers to provide paid parental leave (the other countries are Lesotho, Papua New Guinea, Suriname, and Tonga). Trade union representation is dropping at an alarming rate, from 20.1 percent of the workforce in 1983 to approximately 10.7 percent in 2016. So-called ‘Right to Work’ legislation, which allows workers to avoid paying dues at union workplaces, has been passed in 28 states as of 2017, and is being considered at the national level under the Trump administration.
Vietnam has a strong record of poverty reduction, attained lower middle-income country status in 2009, and has achieved most of the Millennium Development Goals. Yet, increasing inequality is threatening decades of progress. A recent World Bank report concluded that if inequality had not increased, poverty would have reduced further by 1.1 percent1. Economic inequality is reinforced by inequality of voice and opportunity, which are correlated to a decline in inter-generational social and employment mobility2
Despite some achievements, growth is slowing, and the future is uncertain.
The government has made a constitutional commitment to guarantee equality and nondiscrimination for all citizens3, yet evidence shows that discrimination remains a challenge. Policies designed to reduce poverty among ethnic minorities in the poorest districts have been found to be limited in their effectiveness and efficiency4, non-participatory, and not meeting the needs of these groups5. A lack of investment in the education, health, and civic and political engagement of disadvantaged groups further undermines their prospects for a better future.
The tax system is another challenge. Currently, Vietnam relies heavily on CIT, VAT and export and import taxes. On the other hand, since 2009, Vietnam has reduced corporate tax rates from 28 percent to 20 percent; meaning that company profits are now taxed at a lower rate than workers’ incomes. Companies are also receiving public subsidies in the form of tax incentives and tax holidays that further reduce their contributions. Furthermore, tax avoidance and evasion are also letting the richest multinationals off the hook and sucking money out of the budget.
There are also clear gender disparities. For generations, female workers have been more likely to be unskilled, untrained, and limited to labor-intensive and low-wage work. Male workers earn on average 33 percent more than their female counterparts6. Men also have more control over land and other valuable assets. Since 1990, income from labor has made up a declining share of GDP worldwide; ordinary workers are taking home an ever-smaller share of the pie7. In Vietnam, among waged workers there is a substantial gap between the highest and lowest earning sectors.
Oxfam in Vietnam is working to promote public debate on the need to combat extreme inequalities and contribute to the formulation of policies that address inequalities. Vietnam has become more open compared to previous years. Inequality and its links to poverty reduction and sustainable development are not only widely discussed by the public and media, but also by policy makers, the National Assembly and development partners.
More needs to happen to make national taxation more progressive; increase allocations to public services; raise the minimum wage to a living wage level and expand coverage of social protection policies to all workers; close the gender wage gap; create an enabling institutional environment for fairer public policy, with citizens and civil society empowered to claim their rights; and monitor inequality as part of poverty reduction.
1 Vietnam annual poverty assessment report, World Bank, 2018
2 Oxfam, Social Mobility and Equality of Opportunity in Vietnam: Trends and Impact Factors, March 2018
3 The Constitution adopted in 2013 introduced important innovations compared with the 1992 Constitutions, such as a clear distinction between ‘human rights’ and ‘citizen rights’, the assurance of the State to protect human rights; and the recognition of the ‘right to life’, the right of privacy, rights for marriage and divorce, and rights for ethnic identity.
4 Nguyen Tran Lam (2016). Social Change and Inequality in Vietnam. Paper presented at The Asian Development Bank Institute (ADBI) Workshop on Structural transformation and inclusive growth, Tokyo, Japan, 20–21 September 2016
5 Oxfam (2014). Reforming Commune-Level Planning, Investment Decision Making and Community Empowerment for Sustainable Poverty Reduction
6 Nguyen Duy Loi et al (2014). Employment, Earnings and Social Protection for Female Workers in Vietnam’s Informal Sector. EADN Working Paper No 84
7 Oxfam (2014). Even it Up: Time to End Extreme Poverty
Despite being a wealthy country, Singapore does surprisingly badly in the CRI Index, coming in the bottom 10 in the world. In fact, it is one of only three high income countries in the bottom 50.
Singapore’s spending on health, education and social protection is not the lowest, but it is one of the lowest amongst rich countries – only 39 percent of the budget goes to education, health and social protection combined (well below countries such as South Korea and Thailand which spent half their budget on these areas). Indeed, Singapore cut spending on education by over five percent in 2017/18 – one of the biggest percentage cuts in education spending in the world during this period.
Singapore’s treatment of women in the workplace is poo - only Oman is worst amongst the high-income countries. It has no equal pay or non-discrimination laws for women, its laws on both rape and sexual harassment are inadequate, and it is one of the few remaining countries that does not have a universal minimum wage. Singapore introduced a minimum wage purely for cleaners and security guards, but not for any other occupation.
But the thing that lets Singapore down the most is tax, where it comes bottom of the Index. This is partly because of the lack of progressivity of the tax system. Corporation tax is just 17 percent, and the personal income tax rate remains very low at 22 percent for the highest earners. It is also a result of Singapore’s role as a tax haven. The country has a number of harmful tax practices that enable corporations to avoid tax at home and abroad. This contributes to rising levels of extreme inequality in rich and poor countries around the globe, deepening poverty and robbing national treasuries of resources desperately needed by developing countries for investment in public services.
Among the OECD countries, Italy displays a very high, though stable in the past decade, level of equivalised disposable income inequality. Looking at the tails of the domestic income distribution, the weak economic recovery, which started in 2014, has been accompanied with the widening of the gap in the national income share between the higher and lower earners. The slight decline of the yearly inter-decile and inter-quantile ratios expected for 2017 appears seemingly insufficient to improve Italy’s ranking among its OECD peers. Economic vulnerability advanced in 2017 as the absolute poverty headcount in Italy leaped over the 5 million threshold and the relative poverty rate has seen a worrisome 1,6% increase on yearly basis for a headcount settled short of 9,5 million individuals.
Given this context and compared to the other 35 OECD countries (as of 2017), Italy’s middle-list rank (15th position in the OECD area) in the CRI showcases to some extent a positive upward bias determined by the choices of the index subindicators, bound in turn by data availability for the entire index sample.
In assessing the structural features of the domestic fiscal frameworks, the CRI captures some stylized facts about the Italian tax system such as the low degree of its structural tax progressivity and its weak redistributive power. Future desirable refinements of the index - a more thorough analysis of the taxation of middle income groups, a fully-fledged analysis of wealth and capital taxation and a complete comparative picture of the tax burden on labour and consumption versus wealth and capital - should help pave the way for an informed public and institutional debate leading in turn to a long-waited fiscal reform which should aim at simplifying the system, lowering and reshuffling the overall tax burden and increasing its redistributive features. A direction opposite to what the current goverment – backing two-rates or flat PIT proposals, special PIT regimes for autonomous workers or lowering of the CIT rate - is willing to pursue. Tax system inefficiencies are captured in the CRI through a simplified examination of tax productivity. Effectively, Italy’s annual tax and social security contributions gap is officially estimated to be around 110 bn euros: a dramatic shortage of much needed resources for pro-poor progressive policies and productive public investments in a time of severe budgetary constraints due to the high level of Italian public debt and its annual servicing costs. The current government announcement of a tax amnesty is set to send a dangerous message on tax fairness and risks to label as retoric the much needed fight against tax abuses.
On the spending side, Italy’s score is affected by the low level (152nd out of 157 countries) of the public expenditure going to education. While the index focuses on purely quantitative comparisons of the expenditure allocation, its overall stock vis-a-vis efficiency and ability to reach the most vulnerable and to respond effectively to very diversified, socio-economical context-related, personal needs has to be even more prudently addressed by Italian public institutions.
Italy performs poorly on the labour pillar of the CRI (29th out of 35 OECD countries). Strongly affected by the subindicator on legal minimum wage levels or minimal hourly nominal wage set in the collective bargaining contracts, the Italian score echoes the post-crisis dynamics in the national labour market. The gap in hours worked (-1,3 bn) and in FTE working units (-1,2 mn) between 2008 and 2017 remains quite wide. This data, combined with the increase in the labour force participation rate and the decrease of the unemployment rate, following the economic recovery, portays a country where hiring on precarious and temporary contracts (and in low productive-low pay sectors) is on surge. An effect that the structural labour market reform approved in 2015 aimed at contrasting through fiscal incentives for permanent hiring. However, once the incentives expired, the permanent hiring dwindled severely.
In the 2016/2017 national budget, education spending was 13%; this fiscal year (2018/2019) there is a projected increase to 15%. Oxfam and partners in 2017 mobilised under the umbrella of the Education NGO Forum (ENF to oppose the public-private partnership (PPP) model which effectively outsourced part of Liberia’s public education to a private, for profit foreign entity, Bridge International. The ENF, made up of 15 organizations and 43 active members, was very effective in building an advocacy coalition that raised public awareness about the ways that PPP in education would further widen inequality in education, thus worsening inequality in the country.
In 2007, the Government of Liberia (GoL) passed a law to establish County Development Funds (CDF) and Social Development Funds (SDF) with the intent of decentralizing decision making over government spending. The CDF and SDF were established to include citizens – particularly those living in largely rural and resource-rich counties – in the allocation of government revenue (in the CDF) and in corporate revenue (albeit paid through government, through the SDF). The latter is essentially a corporate social responsibility policy for concessionaires and transnational corporations that are exploiting Liberia’s human and natural resources.
Perhaps unsurprisingly, there a number of problems obstructing implementation of the law. First, the funds allocated for each are meagre compared to the revenue generated (especially by concessionaires/TNCs); second, the citizens (for the most part) are unaware of the law and their rights under the law; third, the funds are not being transferred according to the law and are being captured by local elites.
Liberia has made some strides in recent years in improving its tax administration system, and to much lesser extent, tax policy. In 2013, the Liberia Revenue Authority (LRA) was established and became operational on July 1, 2014.
Over the last year, the LRA in collaboration with the Ministry of Finance and Development Planning and in consultation with some stakeholders, including CSOs, developed a national Domestic Revenue Mobilization Strategy. The strategy was validated through a series of stakeholder engagements across the country implementation of which it is hoped will strengthen the country’s ability to mobilise domestic revenue to underpin investment in basic social services.
But as a major tax haven,1 Liberia is unlikely to be able to mobilise adequate domestic revenue to address inequality in the country.2 For example, a 2016 Finance Uncovered investigations revealed that over half a billion pounds of high value London property are registered to Liberian offshore companies.
1 George Turner, Liberia: America’s outpost of financial secrecy, May 26, 2016, FinUncovered
2 George Turner, Liberia: Africa’s unknown tax haven with much to lose, April 28, 2016
Le Burkina Faso est classé dans la moitié inférieure des pays africains sub-sahariens, 126ème rang sur 157 sur l’index CRII2018, montrant toujours des capacités limitées pour réduire les inégalités à travers ses politiques publiques. Malgré quelques maigres améliorations des niveaux du PIB passant de 3,9% à 5,9% entre 2015 et 2016, la relève de la croissance reste trop fragile et instable, montrant la vulnérabilité du pays face à des facteurs externes (allant des changements climatiques au marché faible des commodités). Le dynamisme économique est par conséquent insuffisant pour renforcer le développement dans le long-terme. L´insuffisance de diversification économique profonde rend le pays toujours extrêmement dépendant de l'agriculture et, encore plus récemment, de ses exportations en or.
Les ratios de la dette extérieure sont encore en augmentation, l’encours de la dette/PIB est passé de 35,51% à 37,25% entre 2015 et 2016, faisant du remboursement de la dette un risque pour la stabilité macroéconomique.
Dans ce contexte, un des grands défis du pays est d'augmenter la mobilisation des revenus domestiques. L'augmentation de la collecte des revenus au cours des deux dernières années a été possible grâce à des facteurs économiques mais reste insuffisante comparée aux autres pays de la région (comme le Libéria ou le Togo). Le Burkina Faso taxe largement en dessous de son potentiel, 16% de taux de pression fiscale en 2016 nécessitant une réforme en profondeur de son système fiscal. Trop régressif, les déséquilibres du système fiscal se reflètent à travers une grande dépendance dans la TVA et une taxation quasi-inexistante des revenus les plus élevés et de la richesse.
Des résultats extrêmement insignifiants (le Burkina se situe en 88éme position de tous les pays analysés) dans la protection sociale ont contrebalancé les quelques petits progrès réalisés dans d'autres domaines tels que l'accès à la santé et l'éducation.
Le pilier des dépenses publiques montre les efforts fournis pour améliorer l'investissement dans l'éducation, rendant l'éducation plus accessible à tous. Mais il reste des écarts importants entre les zones rurales et urbaines. En l'absence d'une éducation publique de meilleure qualité, de plus en plus de familles ont également tendance à opter pour l'éducation privée, augmentant les inégalités.
La situation dans le secteur de la santé, où l'accès universel et gratuit à des traitements de base reste insuffisant et où les niveaux d'investissement sont toujours relativement bas, est plus difficile. Les ruptures fréquentes de médicaments et le coût élevé des soins de santé s’ajoutent aux limites d'un système de santé nationale qui nécessite une approche plus transformative, surtout dans la santé maternelle et infantile dans le but d'atteindre les Objectifs de Développement Durable.
Mais là où le pays est vraiment en retard, c´est dans la garantie de droits et de conditions de travail plus égales et justes. Le haut niveau de l'économie informelle signifie que le salaire minimum légal ne s'applique qu'à une minorité de personnes alors que la majorité de la force de travail reste dans l'agriculture. Les femmes sont toujours discriminées sur le marché du travail malgré une égalité théorique des salaires et de l'accès au travail selon la loi.
The country has been making slow but steady progress in tackling inequality since its return the end of the civil war in 2002.
In April 2018, Sierra Leoneans elected a new president, Julius Maada Bio, who made tackling inequality and taxation the hallmark of his campaign. On assumption of office, the new administration immediately introduced the free primary and secondary education package1 across the country.2 The programme took effect on September 17, 2018 when the school year began.
To incentivize teachers, free university education will also be provided for three children of every school teacher with ten years’ experience. The government is set to also introduce a loan scheme as well as special incentives for science and rural based teachers.
Subsequently, the country has nearly doubled from 11 to 21 per cent of the education sectors annual budgetary allocation. But the administration’s cuts in government’s overall expenditure to mob up domestic revenue could affect some of the poorest in the country and undermine government’s development agenda.3
Half of Sierra Leoneans over 15 are illiterate, according to the 2015 UNESCA report. Sierra Leone is one of the poorest countries in the world despite mineral endowment.
To improve domestic revenue mobilisation, the government has set up a presidential commission to review fiscal terms of hundreds of contracts spanning across mining, construction, telecommunications and agriculture.
The economy remains fragile. Majority of the population eke out a living in the precarious informal sector, where there are no safety nets. The informal sector is also dominated women and children.
1 The package includes school fee subsidy for pre-primary to senior secondary level. For students over the age for primary school they will have an opportunity to education through the non-formal education learning centres. Government will also pay for pupils taking private examinations, BECE, NPSE, WASSCE and NVT examination fees. Core subject textbooks – English, Maths, Social Studies, Science and Civic Education as well as essential teaching and learning materials including pens, pencils, chalk, registers and sports equipment will all be supplied for pupils and teachers. The package also includes a school feeding programme for schools in all districts.
2 President Bio launches free education, calls on parents and teachers to support the initiative
3 Keynote address by His Excellency President Julius Maada Bio on the theme: “Education for Development”, at the launch of the Free Quality School Education Programme, August 20, 2018
La France a une longue tradition de services publics solides et de politiques redistributives qui remonte au milieu du XXe siècle. Après la seconde Guerre mondiale, le gouvernement français a lancé une série de mesures visant à mettre en place un filet de sécurité pour les citoyen-ne-s les plus pauvres, avec notamment un système de couverture maladie universel, une éducation gratuite et obligatoire ainsi que des avantages sociaux. Ces mesures étaient financées par des politiques fiscales redistributives telles que l’impôt sur le revenu des particuliers et l’impôt sur les sociétés. Aujourd’hui, ce « modèle social français » est de plus en plus remis en question par les responsables politiques.
La 22e place de la France au classement sur la fiscalité témoigne du recours croissant à des impôts régressifs comme la contribution sociale généralisée (CSG), qui est collectée à un taux unique quels que soient les revenus des travailleurs et travailleuses. Dans le même temps, des impôts progressifs comme l’impôt sur les sociétés sont considérablement réduits. En effet, le taux d’impôt sur les sociétés est passé de 33 % à 28 % en 2017 et sera réduit à 25 % dans les années à venir. La suppression de l’impôt sur la fortune (ISF) et la création d’un impôt forfaitaire sur le capital, dans le cadre de la réforme fiscale de 20171 (qui n’est pas prise en compte dans cette édition de l’indice) risque de faire chuter la France au classement ERI dans les années à venir. Un rapport récent de la World Inequality Database indique que le taux d’imposition effectif des 10 % les plus riches en France a diminué en 2018 et pour la première fois depuis 19902. Cette réforme symbolise la nouvelle approche adoptée par la France en matière d’inégalités, où la politique fiscale n’a plus pour objectif de redistribuer les richesses et financer les services publics mais plutôt d’attirer les investissements. Par conséquent, en matière de progressivité fiscale, la France obtient un score particulièrement faible et se place même à la 82e place, loin derrière les États-Unis (56e).
Les répercussions de la réforme fiscale sur les dépenses dans les services publics ne sont pas encore reflétées dans l’indice, alors que la France occupe aujourd’hui la 3e place dans ce domaine. Le bon classement de la France sur cet indicateur est en majeure partie due à son investissement dans la protection sociale : avec plus de 43 % de son budget alloué à la protection sociale, la France se démarque, avec un filet de sécurité solide qui contribue à la réduction des inégalités. Cependant, avec la baisse de certaines recettes fiscales, des services publics tels que la santé et l’éducation subissent une pression croissante pour assurer une performance constante avec une baisse de moyens. La protection sociale universelle et les retraites sont régulièrement remises en cause par les responsables politiques, en dépit du soutien profond à ces dispositifs de la population française, quelle que soit leur appartenance politique. Avec une éducation et des soins de santé moins abordables, les français les plus pauvressont les premiers menacés par ses coupes dans les dépenses publiques. La France pourrait ainsi perdre son rôle de leader et dégringoler dans le classement relatif aux dépenses sociales.
En matière de droit du travail, la France arrive à la 22e place, loin derrière l’Allemagne qui termine 4e. Toutefois, la France pourrait facilement remonter si elle prolongeait le congé paternité, actuellement limité à 11 jours, quand il est par exemple de cinq semaines au Portugal.
1 Oxfam France. (Septembre 2017). Réforme fiscale : les pauvres en paient l’impôt cassé http://www.oxfamfrance.org/actualites/justice-fiscale/reforme-fiscale-pauvres-en-paient-limpot-casse
2 WID Working paper. (Septembre 2018). Inequality and Redistribution in France, 1990-2018: Evidence from Post-Tax Distributional National Accounts
En comparación con el resto países de la OCDE y con otros países de renta alta, España se encuentra en la mitad inferior del ranking (20ª posición entre los 35 países de la OCDE y 22ª posición entre los países de renta alta). Teniendo en cuenta los tres pilares analizados en el Índice de Compromiso con la Reducción de la Desigualdad (CRI), el decepcionante desempeño de España se explica principalmente por un mercado laboral incapaz de compartir de una manera equitativa los ingresos y las oportunidades del dinamismo económico. En los últimos años, la economía española ha sido una de las más dinámicas en la Unión Europea y, sin embargo, la mayor parte de este crecimiento ha terminado en manos de unos pocos. A pesar de este crecimiento económico y la recuperación en los niveles de empleo, apenas se han notado mejoras en las condiciones sociales de los grupos de personas más afectados por la crisis. Entre 2007 y 2016, la brecha económica entre los más ricos y los más pobres aumentó: mientras que el 10% más pobre vio disminuir su participación en el ingreso nacional en un 17%, el 10% más rico aumentó en un 5% y el 1% más rico en un 9%. Entre 2013 y 2015, cuando España retomó el crecimiento económico, 29 de cada 100 euros del crecimiento económico acabaron en manos del 10% más rico, mientras que tan sólo 8 euros en las del 10% más pobre. La recuperación económica en España ha favorecido a los más ricos cuatro veces más que a los más pobres.
La tasa de desempleo en España sigue siendo una de las más altas entre los países de la OCDE (principalmente entre los jóvenes), y los empleos creados son precarios y mal remunerados. Además, en comparación con otros países europeos, el sistema de protección social en España es menos eficiente en la lucha contra la desigualdad y la pobreza. Este sistema se basa en gran medida en los pagos contributivos que favorecen a los trabajadores más acomodados, en detrimento de los jóvenes y las mujeres, que son los más afectados por la temporalidad y precariedad del empleo. El sistema de protección social está insuficientemente desarrollado y apenas cuenta con fondos suficientes. Como resultado, a día de hoy, más de medio millón de hogares en el país no percibe ningún tipo de ingreso.
Además, el sistema tributario no parece estar cumpliendo con su misión redistributiva. España es claramente menos eficiente que otros países de la UE a la hora de recaudar impuestos, lo que socava directamente la capacidad de financiar adecuadamente las políticas sociales, especialmente para aquellos sectores de la población más desfavorecidos, que a su vez son los que más sufrieron la crisis económica. El análisis del CRI muestra que el sistema tributario actual no es lo suficientemente progresivo, y que requeriría una reforma sustancial para reequilibrar los niveles extremadamente bajos de recaudación de impuestos sobre la riqueza y el capital en comparación con los que soportan las rentas del trabajo y el consumo. Con respecto a los niveles anteriores a la crisis, la carga fiscal que soportan las familias ha aumentado claramente, mientras que las contribuciones de las grandes corporaciones se mantienen en niveles mucho más bajos, a pesar de que sus beneficios han alcanzado niveles históricos. Estas necesidades de reforma están claramente identificadas, y pueden abordarse aumentando la tasa impositiva efectiva que pagan las grandes corporaciones, haciendo que el Impuesto sobre la Renta de las Personas Físicas (IRPF) sea más progresivo y aumentando la recaudación fiscal a través de los impuestos a la riqueza y el patrimonio. Asimismo, es necesario un mayor esfuerzo y voluntad política para abordar la elusión y evasión fiscal de unos pocos y evitar que haya rentas no sujetas a impuestos.