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Latin America and Caribbean Tax Revenues Rise: OECD

by Ulrika Lomas, Tax-News.com, Brussels

24 March 2017


Tax revenues in Latin America and the Caribbean (LAC) countries continued to increase in 2015, according to new data from the Organisation for Economic Co-operation and Development (OECD).

According to the annual Revenue Statistics in Latin America and the Caribbean publication, the average tax-to-GDP ratio for LAC countries reached 22.8 percent of GDP in 2015, up from 22.2 percent in 2014.

The report, produced jointly by the Inter-American Centre of Tax Administrations (CIAT), the Economic Commission for Latin America and the Caribbean (ECLAC), the Inter-American Development Bank (IDB), the Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, and the OECD Development Centre, covers 24 LAC countries, including Cuba and Belize for the first time.

The average tax-to-GDP ratio across LAC countries is currently 11.4 percentage points lower than the OECD average of 34.3 percent. The difference between the OECD and LAC countries is mainly explained by lower tax collection on personal income taxes and social security contributions in the LAC region; however, the difference between OECD and LAC tax-to-GDP ratios in 2015 is the smallest on record.

Surging revenues from the value-added tax (VAT) and excise taxes offset a decline of 0.2 percentage points in corporate income tax revenues and explain the overall increase in the LAC average tax-to-GDP ratio in 2015, the report said.

This is the first decrease in corporate income tax revenues across LAC countries since 2011.

In contrast, personal income tax revenue has reached its highest level, during the period covered in this report, at 2.1 percent of GDP.

The report shows that there is a wide variation of tax-to-GDP ratios across countries. Tax-to-GDP ratios in LAC counties range from 12.4 percent in Guatemala and 13.7 percent in the Dominican Republic to 32.0 percent in Brazil, 32.1 percent in Argentina, and 38.6 percent in Cuba, which is the only country that had a tax-to-GDP ratio above the OECD average.

A common feature in the region continues to be the reliance on indirect taxation as the main revenue source, the OECD said. On average, indirect taxation accounted for a share of 49 percent of total tax revenue in LAC countries in 2014, compared with an average of 33 percent in OECD economies.

The share of corporate income tax revenues in the LAC region remained high compared to OECD levels – 16.8 percent of total tax revenues compared with 8.7 percent respectively on average.

Meanwhile, the personal income tax revenue share was much lower than in OECD countries at 8.8 percent and 24 percent, respectively.

TAGS: tax | Organisation for Economic Co-operation and Development (OECD) | Belize | social security | Brazil | Dominica | Dominican Republic | Guatemala | Argentina | Cuba | Tax

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