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Higher Consumption Taxes For Latin America, Caribbean

24 January 2014

The Organization for Economic Cooperation and Development (OECD) has released the latest version of its Revenue Statistics In Latin America report, showing that the average tax revenue to gross domestic product (GDP) ratio in the 18 Latin American and Caribbean countries covered by the report increased steadily from 18.9 percent in 2009 to 20.7 percent in 2012.

Consumption taxes constitute a greater proportion of these territories' tax regimes, the study shows. Following strong growth over the past twenty years, general consumption taxes (mainly VAT and sales taxes) accounted for 33.8 percent of tax revenues in the Latin American countries in 2011 (compared to 20.3 percent in OECD countries.) The share of specific consumption taxes (such as excises and taxes on international trade) declined to 17.7 percent (compared to 10.7 percent in OECD countries.)

Taxes on income and profits accounted for an average 25.4 percent of revenues in 2011 across Latin America, while social security contributions represented 16 percent. This is significantly lower than in the OECD where these revenues streams accounted for 33.5 percent and 26.2 percent of the tax base, respectively.

The study points out that the tax to GDP ratio has risen significantly in Latin American and Caribbean territories over the past two decades, from 13.9 percent of GDP in 1990 to 20.7 percent of GDP in 2012. Yet the tax to GDP ratio is still 14 percentage points below the OECD average of 34.6 percent.

A special chapter in the report describes the trends driving revenues from non-renewable natural resources across Latin America. Increased global demand for commodities, especially in large emerging markets, has led to sharp price increases and greater fiscal revenues associated with non-renewable natural resources, it says.

TAGS: VAT rates | tax | value added tax (VAT) | Ecuador | tax rates | social security | Bolivia | trade | Argentina | Tax

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