The tax system can affect individuals’ decisions to move out of the informal sector through a combination of positive incentives (e.g. lowering the tax burden on low-income earners, simplification of tax procedures) and dissuasive measures (e.g. stronger audit capacity and sanctions). In Chile, however, pensions do not help to reduce inequality, as the Gini coefficient before and after pension contributions are very similar (Lustig, 2015). In 2008 Chile undertook reform to improve pension coverage and safety net benefits as part of their efforts to fight poverty in old age more effectively.