Investments in social protection and their impacts on economic growth: tax financing options

Social protection systems around the world tend to be underdeveloped. Today, more than half of the world’s population still lack access to any form of social protection, and two thirds of the population are inadequately covered.

Governments often cite a lack of fiscal space as the reason for not expanding social protection, but this ITUC study shows that governments have a number of different tax options at their disposal to raise resources in an equitable way that will also generate positive economic impacts.

The report builds on previous ITUC research showing the economic benefits of social protection by examining the different financing options that states have at their disposal in order to strengthen and extend their social protection systems.

The study simulates the effects of different tax financing scenarios for social protection on household income, employment and overall GDP. The analysis was carried out in Bangladesh, Colombia, Costa Rica, Georgia, Ghana, India, Rwanda and Serbia.

The report finds that overall, progressive forms of taxation generate much better outcomes in terms of redistribution and incomes for poor households and lead to increased employment and GDP over time.

The study underscores that those who can afford to pay more should pay more and that financing inclusive and resilient social protection systems in a fair way is possible. It is just a matter of political will.

Investments in social protection and their impacts on economic growth – tax financing options