Income inequality in Latvia has been very high for many years. Gini coefficient is one of the biggest in the Europe Union. Compared to other European Union countries, Latvia has a very low average tax burden. But this is not the case when the tax burden on persons with different income levels is compared. The aim of the paper is to evaluate the impact of the tax policy on income inequality in Latvia. The objectives are: to overview opinions of international experts about the impact of tax systems on income inequality; to compare tax systems and income inequality in different countries; to analyse the tax burden of existing taxes on various groups of persons with different income level; and to find the best solutions how to change the tax system to reduce income inequality in Latvia. To estimate tax regressivity in Latvia a method of assetment of tax burden on consumption was used. The results show that for persons with lower income the tax burden is significantly higher than the average and is higher than in other Europe Union countries. In Latvia the tax burden falls mainly on persons with low incomes. That is, for persons with low income the tax burden is much higher than the average, but for persons with high income the burden is lower. Regressive tax burden is mainly caused by value added tax and other consumption taxes, because persons with low income spend all of their income for daily needs, and therefore bear the value added tax burden. To reduce the overall regressive tax burden in many countries value added tax rate on food and other products has been reduced, also progressive personal income tax is in place. The same should be done in Latvia, too.