The effect and drive of tax progressivity on tax systems in the East Asia-Pacific

Abstract

Progressive tax systems in East Asia and the Pacific are increasingly a concern due to the widening gap between tax progressivity, income distribution, and human development. The objective of this research is to address the challenge of income distribution inequality and assess the impact of personal income tax reform as a strategy to reduce inequality through direct government administration and budget policymaking. Furthermore, this study aims to understand the influence of political and governance factors on personal income tax development as a guideline for government fiscal policymaking and governance. This study uses quantitative research to examine the causal relationship between variables and phenomena, attempting to explain the occurrence of specific phenomena. The dependent variable examined is the impact of fiscal policy on personal income tax disbursement, focusing on several independent variables that represent effective political and governance factors. The research addresses three primary questions: (1) the impact of changes in personal income tax progressivity on income distribution inequality and human development; (2) the influence of political factors on personal income tax progressivity that impact income distribution inequality and human development; and (3) the influence of governance factors on personal income tax progressivity that impact income distribution inequality and human development. According to the findings, political factors have no effect on tax progressivity, while governance factors, specifically voice and accountability, political stability and absence of violence, and government effectiveness, have a major impact on human development and income distribution inequality. In terms of income inequality and human development in the East Asia and Pacific area, the findings offer important new insights into the significance of governance factors as suppressors in affecting tax progressivity.