ICTD Working Paper 17

We contribute to research on inequality and world top incomes by presenting the first calculations of Chilean top income shares and effective tax rates using individual tax return microdata from 2005 and 2009. We pay special attention to business income, which dominates at the top. Our analysis includes not only distributed profits, but also the large proportion of accrued profits retained by firms, which are rarely analyzed given the difficulty of identifying individual owners. Our most conservative top 1 percent income-share estimate is 15 percent—the fifth highest in the top incomes literature. When distributed profits are adjusted for evasion, the top 1 percent share reaches 22–26 percent. When we broaden the income concept to include accrued profits, which we impute to taxpayers using ownership shares calculated from business tax forms, the top 1 percent share increases to a minimum of 23 percent. Despite this impressive income concentration, the top 1 percent pays modest average effective income-tax rates of 15–16 percent.

Article first published online: 10 APR 2015  DOI: 10.1111/roiw.12196

Note: This research was funded by the International Centre for Tax and Development (ICTD), Sussex, UK. We are grateful to the Chilean Servicio de Impuestos Internos for their generous cooperation in providing access to tax agency data. We thank Emmanuel Saez, two anonymous ROIW referees, four anonymous ICTD reviewers, Mick Moore, Berkay Ozcan, and Facundo Alvaredo for helpful comments.

For full article and further details visithttp://onlinelibrary.wiley.com/doi/10.1111/roiw.12196/abstract


Tasha Fairfield

Michel Jorratt De Luis