The Effects of Paraguay’s Tax Base Expansion on Newly Taxed Citizens

The Paraguayan tax system has expanded significantly over the past decade. In August 2012, the Paraguayan government implemented the personal income tax, and in 2007, expanded taxes to low-income individuals. Tax expansion is an underexplored but important issue, as its consequences may extend beyond income effects to access to credit and the decision of whether to participate in the formal sector, among other questions. This project seeks to shed light on the welfare consequences of revenue collection to better inform public policy for poverty alleviation via redistribution. Motivated by an expanding body of literature on tax systems in developing countries, researchers aim to increase knowledge about the effects of expanding tax systems by including low-income individuals.