DT 11-25 Estructura Tributaria en Uruguay: Las fuentes de Financiamiento del Estado y su Efecto Redistributivo

What is the structure of Uruguay's tax system in relation to that of other countries? To what extent does it alter income distribution? The answer to these simple questions is scattered and has not been systematically addressed in reference to the recent period. To help fill this gap, we document the characteristics of the Uruguayan tax system in a comparative context, highlighting the high weight of indirect taxes, which is a characteristic of the region compared to the developed world. This relative weakness in income taxes negatively affects the redistributive potential of taxes. When considering only income or property taxes, revenue from capital is higher than from labor (24% and 18%, respectively), but this relationship reverses when consumption taxes are considered and distributed between capital and labor. In this way, revenue from capital and labor comes to represent 41% and 56% of the tax burden, respectively. Considering the functional distribution of income in GDP, this represents an effective tax rate on labor of almost 24%, 4.5 points above the rate on capital (19.4%). Taxes on household income collectively show a slightly redistributive profile, resulting from slightly regressive indirect taxes (representing a significant proportion of the income of the first decile) combined with progressive income taxes, which fall on the gth and 10th deciles.

Keywords: Uruguay, Tax System, Indirect taxes, Direct taxes, Redistribution, Inequality.