Latin America and the Caribbean: Tax revenues remain stable

2015-03-11

Tax revenues in Latin America and the Caribbean (LAC) have remained stable in 2013 and continue to be considerably lower, as a proportion of national incomes, than in most OECD countries. Revenue Statistics in Latin America and the Caribbean 1990-2013(fourth edition) shows that the average ratio of tax revenue to GDP in the 20 Latin American and Caribbean countries covered by the report[1] was 21.3% in 2013, 0.1 percentage point above the ratio in 2012. The tax-to-GDP ratio rose from 19.5% to 21.2% over the 2009-12 period.

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Total tax revenues as percentage of GDP, 2013

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 Cooperation and Development (OECD) and the OECD’s Development Centre, was launched Tuesday during the XXVII Regional Seminar on Fiscal Policy, held at ECLAC headquarters in Santiago, Chile.

It shows that tax revenues rose significantly across the region over the 1990-2013 period, pushing the average tax to GDP ratio up by 7 percentage points, from 14.4% to the 21.3% level. While this revenue boost has provided governments in the region increased capacity to improve spending on social programmes and physical infrastructure, the tax to GDP ratio is still 13 percentage points below the OECD average of 34.1%, according to the report.

Wide national variations exist across LAC countries. In 2013, the tax to GDP ratios for the 20 LAC countries included in the report range from Brazil (35.7%), which is above the OECD average, and Argentina (31.2%), to 14% in the Dominican Republic and 13% in Guatemala. The corresponding range in OECD countries was from 48.6% in Denmark to 19.7%[2] in Mexico.

The share of tax revenues collected by local governments in Latin America is small in most countries and has not increased, reflecting relatively narrow fiscal autonomy compared with OECD countries.

The report includes two special chapters. The first measures the usefulness of taking into account non-tax revenues from natural renewable and non-renewable resources, on top of all mandatory contributions to private health and pensions, in addition to tax revenues traditionally covered. The second describes trends since 2000 in revenues from non-renewable natural resources in the LAC countries whose economies are driven by natural endowments, with aggregate projections up to 2014.

Falling crude oil prices in the second half of 2014 are expected to drag down revenues, by as much as 1-1.5% of GDP in Bolivia, Ecuador and Mexico. In general, fiscal revenues from non-renewable, natural resources continue to be very important as a percentage of the total revenues in many countries across the region, and in some cases, such as Venezuela and Ecuador, account for more than 30% of the total fiscal revenues.

Source: Organization for Economic Co-operation and Development