The relationship between tax structures and income inequality

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Empirical analysis shows that direct taxes reduce income inequality while indirect taxes increase it, highlighting critical tax strategies.

Higher reliance on indirect taxation correlates with increased income inequality, suggesting a need for policy change.
Direct taxes exhibit a negative correlation with income inequality, impacting both OECD and non-OECD countries.
Analysis employs System GMM to address endogeneity, focusing on data from 2000 to 2012 for comprehensive insights.
Findings underline the importance of enhancing tax progressivity to mitigate disparities and encourage equitable growth.

Fernandes et al. (2025) studied this question.

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Empirical analysis shows that direct taxes reduce income inequality while indirect taxes increase it, highlighting critical tax strategies.