Directed by Nora Lustig and Peter Hakim, the CEQ was designed to analyze the impact of taxation and social spending on inequality and poverty in individual countries, and provide a roadmap for governments, multilateral institutions, and nongovernmental organizations in their efforts to build more equitable societies.
The main purpose of CEQ is to inform governments of how their fiscal policy affects their equity goals, recommend practical measures, and enhance accountability and transparency through better data collection and evaluation systems. In order to achieve this, CEQ assessments use incidence analysis and a specially-designed diagnostic questionnaire to address three questions:
- How much inequality and poverty reduction is being accomplished in each country through social spending, subsidies and taxes?
- How progressive are revenue collection and government spending?
- Within the limits of fiscal prudence, what could be done to increase redistribution and poverty reduction in each country through changes in taxation and spending?
The CEQ incidence analysis provides the first comprehensive assessment of how taxes and social spending (including indirect subsidies and taxes, and education and health expenditures) affect income inequality and poverty across Latin America. The assessments will be comparable across countries and over time. The country-level studies will examine the distributional effects of individual programs and policy measures—and the net effect of each country's mix of policies and programs. The results will give policy makers, multilateral institutions, and nongovernmental groups the data and analysis necessary to determine what changes in tax and spending policies will lead to greater equality and poverty reduction.
The CEQ diagnostic questionnaire examines whether governments collect and allocate enough resources to support a minimum living standard for all; whether they collect and redistribute fiscal resources progressively; whether their expenditures are fiscally sustainable and their programs of reasonable quality; and whether they are responsibly transparent, i.e., they collect and make public sufficient information, and are subject to independent evaluations.
The CEQ provides new opportunities for civil society organizations to monitor the distributional effects of government taxes and spending. It will also provide a critical source of information and analysis for international donors regarding external resources needed to meet specific goals in low-income countries. And the CEQ results can also be used to monitor the situation of minority and other excluded groups—including for example, Afro-descendants and indigenous groups--and determine the extent to which government taxes and spending affect their incomes and well-being.
CEQ/Latin America is a joint project of the Inter-American Dialogue (IAD) and Tulane University's Center for Inter-American Policy and Research (CIPR) and Department of Economics. The project has received financial support from the Canadian International Development Agency (CIDA), the Development Bank of Latin America (CAF), the General Electric Foundation, the Inter-American Development Bank (IADB), the International Fund for Agricultural Development (IFAD), the Norwegian Ministry of Foreign Affairs, the United Nations Development Programme's Regional Bureau for Latin America and the Caribbean (UNDP/RBLAC), and the World Bank.