Tax policy, income distribution, and gender differences in Peru.

This paper examines the distributional effect of a tax change implemented in Peru in 2015, which affected earned and foreign income. For this purpose, we analyse the before and after-tax distribution of income declared by taxpayers to the tax authority in 2014 and 2015, both at an aggregate level and by gender. We employ three indicators of inequality (Gini, Generalized Entropy and Atkinson), two wellbeing indicators (Atkinson and Sen), and one measure of interdistributional inequality (interdistributional Lorenz curves). The results show that personal income tax in Peru is progressive and reduces inequality; however, income distribution became more unequal after the tax change implemented in 2015, both at an aggregate level and by gender. In terms of gender, it is found that women were relatively better than men both after paying taxes and after the tax change implemented in 2015, which reflects a positive gender-progressive effect of income tax. Finally, the improvement in the relative position of women after paying taxes is only reflected in the highest income deciles, whereas the improvement related to the tax change is observed along the entire income distribution, with the exception of one decile.