A/HRC/43/45/Add.1 the Renta Dignidad, a universal, non-contributory old-age pension scheme.52 While the targeted use of hydrocarbons taxes for social protection measures is unique and positive, 53 it implies that the social protection system heavily relies on revenues from natural resources, which are susceptible to external shocks.54 Furthermore, in the absence of progressive direct taxes, the redistributive impact of hydrocarbons taxes appears to be offset to some extent by the weight of indirect taxes, making the tax system highly regressive overall,55 and one of the least redistributive systems in the region.56 22. The complexity of the tax system also creates difficulties in maximizing the collection of taxes. The payment of taxes is cumbersome and complex, requiring on average 42 payments per year, compared to the regional average of 27.57 This is reportedly one of the factors that discourage private investments and hinder the optimal collection of taxes. Furthermore, according to some stakeholders, there is deep-rooted distrust of public institutions, and there is no “tax culture” that encourages all people to pay taxes on the basis of the social compact with the State. As discussed below, the lack of institutionalization of taxation, coupled with the informal economy, reportedly contributes to the high incidence of tax evasion and avoidance. 23. At present, there seems very little political scope to broaden the tax base or to revamp the tax system in order to increase its progressivity and improve tax collection. The violent demonstrations in 2003 against a proposal to introduce income tax are still vivid in the minds of many,58 and they fear that the idea of income tax may create unnecessary discord in the ways in which the economy and society operate. In the long run, however, it is critical to consider simplifying the tax system and introducing more progressive forms of taxation, such as personal income tax and wealth tax, so that the scale of collection and the redistributive power of taxation can be maximized. As recommended in the guiding principles on human rights impact assessments of economic reforms, direct and progressive taxes should be prioritized (A/HRC/40/57, para. 11.4). If tax policy is to promote the redistribution of wealth and reduce inequality, a variety of tax reform measures should be considered, including: taxing higher-income categories and wealth more strongly; taxing certain financial transactions; shoring up the tax base; and enhancing tax collection, the efficiency of the tax administration and the fight against tax evasion and avoidance (ibid., para. 11.5). B. Informal economy 24. Informal markets are deeply embedded in the political, economic and social structure. While there is no comprehensive and accurate data on the scale of informality, various studies have estimated it to be in the range of 60 per cent of GDP.59 Although a more recent analysis by the International Monetary Fund has suggested that informality has been considerably reduced from 65 to 46 per cent between 2005 and 2015, 60 it confirms that the scale and influence of the informal economy are still considerable. In the field of 52 53 54 55 56 57 58 59 60 Marcelo Ticona Gonzales, “The dignity pension (renta dignidad): a universal old-age pension scheme”, in UNDP, Sharing Innovative Experiences: Successful Social Protection Floor Experiences (New York, 2011), p. 52. See International Labour Office, “Financing social protection through taxation of natural resources: Bolivia”, August 2016. Ticona Gonzales, “The dignity pension (renta dignidad)”, p. 52. Arauco and others, “Explaining low redistributive impact in Bolivia”, p. 337. Cristina Arancibia and others, Income Redistribution in Latin America, (Helsinki, United Nations University World Institute for Development Economics Research, 2019), p. 4. See World Bank Group, Doing Business 2019. Villarroel Böhrt, “Tributación y equidad en Bolivia”, p. 12. See Friedrich Schneider, Andreas Buehn and Claudio E. Montenegro, “Shadow economies all over the world: new estimates for 162 countries from 1999 to 2007”, Policy Research Working Paper, No. 5356 (Washington, D.C., World Bank, 2010); and Leandro Medina and Friedrich Schneider, “Shadow economies around the world: what did we learn over the last 20 years?”, IMF Working Paper, No. WP/18/17 (Washington, D.C., IMF, 2019). IMF, “Bolivia: 2018 article IV consultation”, p. 19. 9