A Public Expenditure Review for Paraguay : The Quest for Optimal Tax and Expenditure Policies for Shared Prosperity
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Washington, DC
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Paraguay has achieved significant
progress in terms of fiscal policy over the past decade.
Despite this progress on fiscal reform, three major
challenges remain: 1) a volatile macroeconomic environment;
2) still insufficient fiscal resources; and 3) high levels
of poverty and inequality. In light of these three
challenges, the objective of this report is to examine the
extent to which fiscal policy in Paraguay has contributed to
the social progress of the past decade, and can serve the
purpose of further reducing poverty and enhancing shared
prosperity in the years to come. Overall, fiscal policy can
contribute to containing poverty and inequality by buffering
the negative impact of financial and economic crises on
vulnerable parts of the population. Moreover, tax and
expenditure policies that redistribute from high- to
low-income households in a well-targeted manner can also
contribute to these goals. The current structure of the tax
system appears suboptimal in light of the identified
challenges. Even though the reliance on indirect taxes
insulates public revenues from economic volatility to a
certain extent, it imposes high costs associated with
sufficiency and equity of the system. Adequate taxation of
the agricultural sector is needed to level the playing field
for business development in all sectors and to address the
insufficiency of taxes. While fiscal policy contributes less
to poverty reduction and shared prosperity in Paraguay than
in the other countries analyzed for this study, direct
transfers are well targeted. Overall, Paraguay's fiscal
system is less progressive than in other Latin American
countries analyzed. Paraguay's reliance on indirect
taxes makes its overall tax system regressive. The
sufficiency and efficiency of social expenditures have to be
considered within the context of fiscal prudence, which is a
continuous task. This is especially important in light of
the recent expansionary fiscal stance. Only if the
Government is able to sustain fiscal prudence in the future,
will it be able to maintain macroeconomic stability and performance.
Palabras clave
ACCESS TO FINANCING, ACCESS TO INSURANCE, ACCOUNTABILITY, ACCOUNTING, AGGREGATE DEMAND, ALLOCATION, ASSET CLASSIFICATION, AUTOMATIC STABILIZERS, BALANCE OF PAYMENTS, BANKING LAW, BASIC SERVICES, BASIC SOCIAL SERVICES, BENEFICIARIES, BROKERS, BUDGET CONSTRAINTS, BUDGET DATA, BUDGET PROCESS, BUSINESS CYCLE, CAPACITY BUILDING, CAPITAL EXPENDITURE, CAPITAL EXPENDITURES, CAPITAL INFLOWS, CASH TRANSFER, CENTRAL BANK, CENTRAL GOVERNMENT, COMMODITY PRICES, COMPUTABLE GENERAL EQUILIBRIUM, COMPUTABLE GENERAL EQUILIBRIUM MODEL, CONSUMER GOODS, CORPORATE INCOME TAX, CREDIT MARKETS, CURRENCY, DATA AVAILABILITY, DATA COLLECTION, DATA QUALITY, DEBT MANAGEMENT, DEBT POLICY, DEPOSIT, DERIVATIVES, DEVELOPING COUNTRIES, DEVELOPMENT FINANCE, DISTRIBUTION OF INCOME, ECONOMETRIC TECHNIQUES, ECONOMIC CLASSIFICATION, ECONOMIC DEVELOPMENTS, ECONOMIC GROWTH, EFFICIENCY OF PUBLIC SPENDING, EMERGING ECONOMIES, EXCHANGE RATE, EXPENDITURE, EXPENDITURE ANALYSIS, EXPENDITURE CATEGORIES, EXPENDITURE FORECASTING, EXPENDITURE POLICIES, EXPENDITURES, EXPENDITURES ON HEALTH, EXPORT GROWTH, FINANCIAL CRISIS, FINANCIAL DISTRESS, FINANCIAL LIBERALIZATION, FINANCIAL MANAGEMENT, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL SYSTEM, FISCAL ACCOUNTS, FISCAL BALANCE, FISCAL CONSOLIDATION, FISCAL CONSTRAINT, FISCAL DATA, FISCAL POLICIES, FISCAL POLICY, FISCAL PRUDENCE, FISCAL REFORM, FISCAL REVENUE, FISCAL RISK, FISCAL STANCE, FISCAL SYSTEM, FOREIGN DIRECT INVESTMENT, GOVERNMENT INTERVENTION, GOVERNMENT REVENUE, GOVERNMENT REVENUES, GOVERNMENT SPENDING, GROSS DOMESTIC PRODUCT, HEALTH CENTERS, HEALTH EXPENDITURE, HEALTH OUTCOMES, HEALTH SECTOR, HEALTH SPENDING, HOUSEHOLD INCOME, HUMAN DEVELOPMENT, IMPORT DUTIES, INCOME DISTRIBUTION, INCOME GROWTH, INCOME INEQUALITY, INCOME REDISTRIBUTION, INCOME TAX, INCOME TAX REFORMS, INCOME TAXES, INFLATION, INFORMATION EXCHANGE, INFORMATION SYSTEMS, INSURANCE, INTEREST EXPENDITURE, INTERNAL CONTROL, INTERNATIONAL CREDIT, INTERNATIONAL DEVELOPMENT, INTERNATIONAL STANDARDS, INVENTORIES, LEGAL FRAMEWORK, LEVELS OF PUBLIC SPENDING, LIABILITY, LIQUIDITY, MACROECONOMIC ENVIRONMENT, MACROECONOMIC POLICIES, MACROECONOMIC STABILITY, MACROECONOMIC STABILIZATION, MACROECONOMIC VARIABLES, MACROECONOMIC VOLATILITY, MARGINAL RATE, MARGINAL TAX RATES, MINISTRY OF FINANCE, MONETARY FUND, MUNICIPAL LEVEL, MUNICIPALITIES, NATIONAL ACCOUNTS, NATIONAL ACCOUNTS DATA, NATIONAL TREASURY, NEGATIVE SHOCKS, NET CAPITAL, NET LENDING, OUTCOME DATA, PENSION, PENSION FUND, PENSION SCHEME, PERSONAL INCOME, PERSONAL INCOME TAX, POLITICAL ECONOMY, PORTFOLIO, PORTFOLIO INVESTMENT, POVERTY IMPACT, POVERTY REDUCTION, PRICE CHANGES, PRICE STABILITY, PRIVATE CONSUMPTION, PRIVATE INVESTMENT, PRIVATE SECTOR, PROGRAMS, PRUDENTIAL REGULATIONS, PUBLIC CONSUMPTION, PUBLIC DEBT, PUBLIC EDUCATION, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE REVIEW, PUBLIC EXPENDITURES, PUBLIC FINANCES, PUBLIC FINANCIAL MANAGEMENT, PUBLIC HEALTH, PUBLIC INVESTMENT, PUBLIC PENSION, PUBLIC RESOURCES, PUBLIC REVENUES, PUBLIC SECTOR, PUBLIC SERVICES, PUBLIC SPENDING, PUBLIC WORKS, PURCHASING POWER, REAL GROWTH, REFORM PROGRAM, REMITTANCES, RENEGOTIATION, REVENUE INCREASES, SANITATION, SERVICE DELIVERY, SERVICE PROVISION, SMALL BUSINESS, SOCIAL EXPENDITURE, SOCIAL EXPENDITURES, SOCIAL OUTCOMES, SOCIAL PROGRAMS, SOCIAL PROTECTION, SOCIAL SERVICE, SOCIAL SERVICES, STATE AGENCY, STRUCTURAL REFORMS, STRUCTURE OF REVENUES, TAX, TAX ADMINISTRATION, TAX BASE, TAX COLLECTION, TAX COLLECTIONS, TAX CREDIT, TAX EXEMPTIONS, TAX EXPENDITURES, TAX POLICY, TAX RATE, TAX RATES, TAX REFORM, TAX REGIME, TAX REVENUE, TAX REVENUES, TAX SYSTEM, TAX TYPE, TOTAL EXPENDITURE, TOTAL EXPENDITURES, TOTAL PUBLIC EXPENDITURE, TRANSACTION, TRANSPARENCY, TREASURY, TREATY, UNCERTAINTY, VALUATION, VALUATIONS, WEALTH TAXES