08/02/2018 11:38 GMT+7 Email Print Like 0

Wealth inequality drags growth: experts

As the world faces a crisis in wealth distribution, some experts doubt if the accumulation of capital will encourage innovation and investment, but instead, lead to multiple tax burdens and increase the gap between rich and poor. 

During a seminar in Hanoi on February 6, representatives from the Vietnam Institute for Economic and Policy Research (VEPR) and international charitable confederation Oxfam agreed that the four policies against tax inequality - public services, public spending on health and education, and labour policies - should be employed simultaneously. 

Deepak L. Xavier, head of Oxfam International’s Even It Up Campaign, said taxation was an important tool to lessen inequalities. 

However, recent studies from Oxfam and the World Bank (WB) all show that the tax systems in developing countries are often highly regressive and generate insufficient revenue. A lack of transparency and lack of co-ordination in their policies is said to be making the global tax system less effective in addressing poverty and inequality. 

Xavier said that tax burdens, such as the existence of tax havens, were driving global inequality up further by allowing multinational companies and super-rich individuals to shirk their tax obligations outside their home country. 

He argued that should these huge taxable amounts of income be retrieved in full, they could be used to fund public services, such as health care and free education - and any other social security programme. 

In agreement, Vu Sy Cuong, vice-dean of Financial Policy Analysis at the Academy of Finance, said he considered wealth inequality a great barrier to growth and a hindrance to the chances of the poor contributing to society - even creating a reason for crime and corruption. 

However, he said the present policy framework might not be sufficient to address the wealth distribution inequalities that were becoming increasingly common in Vietnamese society. 

Cuong suggested that to prevent further deterioration of poverty, the Government should recognise all the growing forms of economic inequality and take measures to ensure successful innovation and economic growth enabled poverty reduction. 

Xavier said that to minimise the growing gap between the rich and the poor, Vietnam should implement progressive policies on state governance, the tax system, public services, and workers’ rights. 

He also suggested the application of a heavier, more progressive tax bracket for billionaires, to end extreme inequality and encourage the flow of funds into public welfare spending. 

According to Oxfam’s 2017 study, the current level of global inequality is so great that just one percent of the richest people accounted for more than 80 percent of the world’s total assets, while the world’s poorest 50 percent did not increase their wealth, even slightly. 

Data from the World Bank shows that income inequality in Viet Nam has increased in the past two decades even though the poverty line has been raised significantly. 

Since 2004, the income gap between the richest 20 percent in the country and the rest of its labour force has been increasing, along with the number of super-rich people, according to the bank.-VNA/VNP