Section 3 · Inequality — EAP Tax Strategy

The framework for linking taxation and inequality is mature (Piketty, Saez and Zucman; DINA project). EAP is the region where it has not yet been applied at country level. We attempt a stylised pre-tax → post-tax decomposition for 8 of the 17 EAP economies; for the other 9 even that is not feasible from public data.

Headline: The Top 10% has captured 40–60% of cumulative growth since 1995 in most EAP economies. We cannot say how much consumption tax, income tax, excise, CIT or property each decile pays as a share of its income — DINA is absent in all 17 EAP countries.

Where the growth went

Share of growth captured by group, 1995-2023

Share of cumulative pre-tax national income growth captured by each group, 1995–2023. PNG is the standout outlier: the Bottom 50% lost income in absolute terms.

Latest-year inequality: EAP-10 vs rest of world. EAP sits in the upper half of the global LMIC/UMIC inequality distribution.

Average pre-tax national income per adult per group across EAP-10. Bottom incomes have grown, yet income/wealth differences have not narrowed.

The post-tax simulation

For 8 EAP economies (IDN, PHL, VNM, THA, MYS, LAO, MNG, PNG) we build a stylised pre-tax to post-tax decomposition under fixed incidence rules: CIT borne 100% by capital owners; capital taxes split 90/10 between the Top 1% and P90–P99; VAT allocated by consumption with an informality haircut on the bottom three deciles; PIT allocated by tax-record-style top-share rules.

Stylised pre-tax vs post-tax income shares for the 8 EAP economies. Top 1% post-tax compression ranges from 1.1 pp (Myanmar) to 7.0 pp (Malaysia) — small under the assumed incidence rules.

Findings

Benefits of growth captured by the top 10% and even more by the top 1% in most EAP economies, with the bottom 50% capturing only a small share of growth.
The role of taxation in redistributing income is not clear, but the stylised simulation suggests that it has played a limited role.
We cannot answer how much consumption tax, income tax, excise tax, CIT or property each decile pays as a share of its income.

Not only fairness reasons to care about this, but also efficiency and political reasons: citizens find it hard to consent to a tax system whose distributional consequences they cannot see.

Important caveat: WID does not publish country-specific inequality data for 7 of the 17 EAP economies (Fiji, Kiribati, Solomon Islands, Tonga, Tuvalu, Vanuatu, Samoa). Country-level analysis runs on EAP-10 only. See the Pacific gap note for the full caveat.

Source files

All figures

18 PNG files

Inequality levels, growth incidence, and the stylised pre/post-tax decomposition.

Code

7 R scripts

WID load → clean → analyse → tables → figures + post-tax simulation.

Caveat

Pacific inequality gap

Why country-level inequality runs on EAP-10 only.

Next: Section 4 — Structural Indicators →