# **5.5. How Progressive or Regressive Are Interventions and Overall Fiscal Policy?**

Grenada has managed to establish a tax system with progressive direct taxes, neutral indirect taxes, and globally progressive transfers that is redistributive but that has substantial space to increase efficiency in the reduction of inequalities. Calculation of the concentration indexes of fiscal interventions in Grenada and obtaining the revenue concepts yielded the following results, which are presented in table 3. All taxes have a concentration index of 0.522, higher than the Gini index of market income, and a Kakwani index that is positive but close to 0, which defines this intervention as globally progressive. This result is stronger in the PIT case, while the VAT behaves more like a proportional tax. Similarly, when the transfers are analyzed, they show a negative concentration index and a positive Kakwani measure, so that they can be considered globally progressive in absolute terms. Both transfers have this characteristic in such a way that the benefits (per equivalent adult) decrease when (prefiscal) market income increases.

**Table** **<u>3 Concentration Index and Progressivity of Fiscal Intervention</u>**

||Size<br>(wrt Market<br>income)|Gini index|Concentration<br>index|Kakwani<br>index|Inequality<br>reduction<br>effect|
|---|---|---|---|---|---|
|**MARKET INCOME**|**1**|**0.416**||||
|**DISPOSABLE INCOME**|**0.998**|**0.397**||||
|- SEED|0.016||-0.396|0.812|0.013|
|- School Feeding Programme|0.001||-0.312|0.729|0.001|
|**All direct transfers**|0.017||-0.387|0.803|0.014|
|- PIT|0.019||0.865|0.449|0.009|
|**CONSUMABLE INCOME**|**0.927**|**0.395**||||
|- VAT|0.070||0.422|0.006|0.000|
|- Excise Tax|||||0.000|
|**All indirect Taxes**|0.070||0.422|0.006|0.000|
|**All taxes**|0.089||0.522|0.106|0.010|
|**FINAL INCOME**|**1.007**|**0.367**||||
|- Benef. Inpatient attendance|0.024||0.121|-0.295|-0.007|
|- Benef. Outpatient attendance|0.007||0.104|-0.312|-0.002|
|- Benef. Community health|0.010||-0.066|-0.482|-0.005|
|**All health attendance**|0.040||0.072|-0.344|-0.014|
|- Preschool attendance|0.006||-0.241|-0.657|-0.004|
|- Primary school attendance|0.013||-0.230|-0.647|-0.009|
|- Secondary school attendance|0.015||-0.157|-0.573|-0.009|
|- Tertiary attendance|0.005||0.240|-0.177|-0.001|
|- Special education attendance|0.000||-0.788|-1.204|0.000|
|**All education attendance**|0.039||-0.147|-0.563|-0.023|
|**All in-kind transfers**|0.079||-0.039|-0.455|-0.039|

_Source_ : Own calculation based on SLCHBS 2018.

# **5.6. What Is the Marginal Contribution to the Redistributive Effect of Fiscal Interventions?**

Other than in the area of tertiary education, Grenada’s fiscal policies contribute to the reduction of inequality. In this part of the paper, we use the definitions of the marginal contribution to the redistributive effect of fiscal interventions, mainly those contributions with respect to the relative size of specific items as well as vertical equity, included in the concepts presented in the CEQ framework. Both help with showing which interventions (or groupings of them) are effective in reducing inequality through fiscal policy. This exercise shows that, with the exception of tertiary education, the rest contribute to the reduction of inequalities. When 17