a reduction in inequality is a consequence of the imposition of direct taxes and direct transfers, and that the effects of indirect taxes (from disposable to consumable income) appear to be small. Considering inkind transfers (due to publicly provided education and health services), the reduction in the Gini is 15.6 points. Importantly, we document that the inequality reduction from MIPP to consumable income is among the highest in an international comparison considering the countries of the CEQ database, only trailing behind South Africa and Argentina. We also find that inequality reduction due to fiscal policies was higher in 2019 than in 2009: 6.4 versus 3.1 Gini points (comparing MIPP with consumable income). To be sure, the post-fiscal Gini coefficient is still very high (0.521) and among the top 9 in a subset of 52 countries of the CEQ database and in the top third of 18 upper-middle income economies.

Our results also indicate that direct transfers and public services typically benefit mostly the poorest. We document that half of the direct transfers go to the first income quintile, which includes the population in extreme poverty and part of those in moderate poverty. Bolsa Familia is the program with the highest progressivity, followed by rural pensions and Benefício de Prestação Continuada (BPC). They represent an important share of MIPP for the first quintile of the income distribution as measured by the pre-fiscal income. The results also suggest that the first and second income quintiles are net cash beneficiaries of the fiscal system, while the third, fourth and fifth are net payers. When considering the total fiscal position, which includes the education and health in-kind benefits, the results show that the first three quintiles are net receivers, while the last two are net payers of the fiscal system. At the same time, we document a large heterogeneity in the distribution of government expenditures. The first quintile of the MIPP income distribution receives about 70% of Bolsa Familia’s transfers, 55% of rural pension, 45% of BPC transfers, and only 1% of Abono Salarial. This group is estimated to receive 35% of expenditures in primary education and 6% of expenditures in tertiary education. In contrast, the fifth quintile receives close to 37% of expenditures in tertiary education.

When it comes to in-kind transfers, we find that more than 60% of the preschool and primary education benefits are received by the first two MIPP quintiles. Interestingly, the benefits decrease with income and are very low for the richest quintile. Secondary education benefits are not that much concentrated in the first MIPP quintile (27%), but the benefit share also declines with income and reaches 6% in the fifth quintile. Tertiary education benefits, in turn, stand in stark contrast: the share of benefits is positively correlated with income, and about 35% of the benefits go to the richest quintile and less than 10% to the poorest one. We also document that the tax incidence of primary education is higher than 100% of MIPP in the first income quintile, and decreases substantially in the second quintile (21.1%), reaching 0.3% in the last quintile. Higher education is also more important in the first quintile than for the richest, with tax incidence being equivalent to about 31.4% of MIPP in the first quintile, 7% in the second one, and less than 1% in the last one. Preschool education incidence is about 11% in the first quintile, decreasing to 2.2% in the second quintile and less than 1 percent in the rest of the distribution.

Age groups are affected differentially by fiscal policies. We find suggestive evidence that the elderly (those aged 60 or more) are the largest beneficiaries of the fiscal system in Brazil. The elderly are eligible for pensions providing 1 minimum wage (BRL 999 in 2019 or USD 181) even with no to limited number of formal labor contributions to the pension system. 3F<sup>4</sup> Poverty rates among the elderly go from 28.6 to 13.3 percent due to fiscal policies. Moreover, we document that fiscal system makes children and young adolescents (i.e., aged 0-15) poorer, as the post-fiscal poverty rate is greater than the pre-fiscal poverty

> 4 Considering an exchange rate of USD/BRL = 5.5.

4