The Role of Fiscal Policy in the Achievement of Social Cohesion. Tax Mix and Public Social Spending

Abstract

Nowadays, social cohesion arouses an increasing interest among both academics and policymakers, since the promotion of cohesive has been proven an indispensable framework for the achievement of sustainable development. Fiscal policy can play a fundamental role to enhance social cohesion, when aiming at ensuring an equitable distribution of income and wealth. This paper examines the connection existing between a progressive fiscal policy (as far as both the income and the expenses sides are concerned) and the level of social cohesion across European and Latin American countries, and explores the odds of enhancing social cohesion by acting on these parameters. The results confirm the convenience of a progressive and redistributive tax system, relying on direct rather than indirect taxation, as well as a public spending policy based on the adequate provision of social goods and services, in order to promote equality and equity that enable progress towards social cohesion.