Progressive taxation in underdeveloped countries

Abstract

The arguments for progressive taxation in the nineteenth century were strongly countered by reference to their harmful effects on the incentives to produce, save and invest. This position is still fairly widespread in discussions on what makes a sound fiscal policy for the underdeveloped countries today. The present article argues that progressive taxation corrects the misdistribution of national income, producing additional positive effects in a depressed economy in the process of development, especially as regards investment and the balance of payments. The considerations set out by the author suggest that in underdeveloped countries, progressive taxation must therefore not be regarded only from the point of view of national finance, but from that of the redistribution of income.

JEL: E24, E62, H21, O15, F32