Rich–poor gap widens in Brazil

A report dubbed País estagnado: um retrato das desigualdades brasileiras – 2018 (“Stagnated Country: A Portrait of Brazilian Inequalities – 2018”), published Monday (Nov. 26) by NGO Oxfam Brasil, shows that the reduction of income inequalities in Brazil has been cut short by the first time in the last 15 years as a result of the recent economic recession. The standstill took Brazil from 10th to 9th in the global ranking for income inequality in 2017.

The gap between rich and poor had been on the wane in Brazil since 2002, according to the Gini index - Arquivo/Agência Brasil

“We’re facing a severe economic crisis that has brought along with it a wave of unemployment. This wave has lowered Brazil’s general income, especially the income in the base of the social pyramid—the first people to suffer in times of crisis. As a result, an increase is seen in work income inequality, poverty, and a stagnation in the efforts to redress the difference in pay between the two genders, in addition to a deterioration in the income balance between blacks and whites. This landscape is what makes up the country portrayed by the report,” said Rafael Georges, author of the document and Oxfam campaign coordinator for Brazil.

Income lows

The gap between rich and poor had been on the wane in Brazil since 2002, according to the Gini index for total income per capita, gauged by the National Household Sample Survey (PNAD-IBGE).

In 2017, the poorer half of the Brazilian population underwent a decrease of 3.5 percent in revenues from work. Their monthly income averaged $203.77—less than the minimum wage. On the other hand, ten percent of the richer Brazilians experienced an expansion of nearly six percent in their earnings from work. Their average monthly income stood at $2,462.58), according to PNAD-IBGE figures.

The number of poor people in Brazil also rose in the period—15 million in 2017, or 7.2 percent of the population—up 11 percent from 2016’s 13.3 million. Poverty encompasses individuals living with up to $1.90 a day, as set by the World Bank.

Georges argues that, from a structural viewpoint, Brazil is being forced to learn its “harsh lesson” by admitting that social achievements can be lost rather quickly. “In 2017, we went back to the same levels as 2012 in terms of the percentage of the population living in poverty,” he said.

This change, he noted, shows how important it is to adopt structural measures. “Brazil learned to fight inequality by increasing income, which is key, but income isn’t everything. It’s important to ensure solid social infrastructure through health care and education services, especially with higher investment in these areas,” he said.

The reduction of income inequalities in Brazil has been cut short by the first time in the last 15 years as a result of the recent economic recession - Tomaz Silva/Agência Brasil

Taxing the rich

In its report, Oxfam lists a number of changes in Brazil’s current tax system that could allow Brazil to make two to five years’ worth of progress in inequality reduction, considering the yearly average of reduction observed since the current Constitution was introduced, in 1988. “The fiscal issue is crucial. We can’t devise public policies if accounts are not balanced. This is out of discussion, and Oxfam is part of it. The benefits arising from social expenditure must not be left out of the equation either. The fiscal issue is not purely fiscal—it’s social above all,” he argued.

The document lists a number of measures aimed at tackling inequalities in Brazil—chief among them the reduction of the country’s indirect tax load, which weighs particularly heavy on the poor.

“Brazil must urgently rethink its tax system and redistribute the bill, cutting the weight of indirect taxing on goods and services, and increasing the taxes on individual income and property,” Rafael Georges explained.

Of the member countries of the Organization for Economic Co-operation and Development (OECD), Brazil is the one with the lowest taxes on income and property. While, for every R$ 1 collected in Brazil, R$ 0.22 comes from taxes on income and property, the average among OECD nations stands at an equivalent of R$ 0.40, In the US, 59.4 percent of tax collection comes from the population’s income and property.