Influence of tax structures on income inequality in WAEMU countries

Abstract

Extreme inequalities often engender the kind of poverty that has major implications for the enjoyment of civil and political rights (Alston, 2019). Left unchecked, it can lead to oligarchy, socio-political unrest, political instability, insecurity crises (Miller, 2021; Tanzi, 2018; Karen, 2017). Yet all citizens are legitimately entitled to a share of income generated by the state because they agree to obey the legitimacy of the state and the prosperity of its members (Hemel, 2019). Income distribution before tax may change due to changes in tax regimes (Bourguignon, 2015). The present research therefore aims to analyze the influence of the tax structure on income inequality in WAEMU over the period 2000-2020. To do this, the technique of least squares in two stages is used. The results show that progressive and regressive taxation positively affect income inequality in the WAEMU area. The overall level of taxation and proportional taxes do not have a significant effect on income inequality in WAEMU countries.  Therefore, to reduce income inequality, WAEMU countries have an interest in reducing both regressive taxes, and progressive taxes. But the decline of the former must be greater than the latter.