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OECD notes improved Latin American tax collection

Thursday, 23 January 2014   (0 Comments)
Posted by: Author: Judith Ugwumadu
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Author: Judith Ugwumadu

Tax revenues have increased across the majority of Latin American and Caribbean countries over the past two decades but still lag behind the level seen across developed economies, the Organisation for Economic Cooperation and Development said today.

Analysing revenues across 18 countries that have published data for 1990 to 2012, the OECD found that the average tax take increased from 13.9% of gross domestic product in 1990 to 20.7% in 2012. But this tax-to-GDP ratio was still 14 percentage points below the OCED average of 34.6%, according to the annual Revenue statistics publication. 

The increases were a reflection of ‘favourable macro economic conditions, changes in the tax systems design and strengthening tax administrations,’ the OCED said. 

‘Most Latin American governments responded [to the economic instability of the 1980s] by both cutting public expenditure and implementing policies aimed at increasing tax revenues with budget management and fiscal balance improving considerably,’ it noted. 

In 2012, the percentage of tax revenues to GDP rose in 13 of the 18 counties for which the data is available, remained unchanged in one and fell in only four countries. 

The trend contrasts with that seen in the OECD area where the ratio has been relatively stable – in 2010 it stood at 33.8% – less the one percentage point above its level in 1990. 

Wide national variations exist across Latin America, the OCED said. At the upper end are Argentina (37.3%) and Brazil (36.3%), but at the lower end are Guatemala (12.3%) and Dominican Republic (13.5%).  

‘The share of tax revenue collected by local governments in Latin America is small in most countries and has not increased, reflecting the relatively narrow range of taxes under their jurisdictions compared with OECD countries,’ the group added.

The largest increases relative to GDP in 2012 were seen in Argentina, Ecuador and Bolivia, while the biggest falls were seen in Uruguay and Chile. 

Following strong growth over the past 20-years, general consumption taxes accounted for 33.8% of tax revenue in Latin American countries in 2011. Taxes on income and profits accounted for an average 25.4% of revenues in 2011, while social security contributions represented 16.9%. 

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