Juan Pablo Jiménez Economic Commission for Latin America and the Caribbean ITC-Workshop How to Operationalize the International Tax and Development Agenda 12-14 September 2011 Bonn, Germany
I. Diagnosis and Challenges for Latin America Countries II. Agenda and proposals
In average: low tax revenues But this is partially true High heterogeneity between countries Importance of non tax revenues High volatility of fiscal revenues. Importance of fiscal revenue from commodities. The tax structure is highly unbalanced: Primacy of indirect taxes. Low collection of income taxes. Personal income tax is basically a tax on wage income. Property taxes are insignificant.
Personal Income Taxes generate little revenue due to: Significant levels of informality Low tax compliance Extensive use of tax incentives and preferential treatment of capital income Political economy problems in implementing reforms The widespread use of tax expenditures erodes the tax base High levels of evasion damage stability and legitimacy of the tax system The cost of collection is high
These Declaration Principles are one step forward, but to advance it is necessary to include different regional and structural characteristics: Social inequality Informality Subregional disparities, Different institutional organizations (federal, unitary, decentralized countries), Productive specialization, Strong concentration of power in elites. The regional organizations could help to tailor an adequate regional and country responses.
Strengthen direct taxation, especially the personal income tax. Expand the tax bases Taxing capital income Review the use of tax incentives: Set clear goals Improve measurement of tax expenditures Analyze the impact of these incentives Improve capacity management and effective control of tax administrations Measuring the tax evasion and tax gap.
Strengthen property taxes, especially at subnational levels. Taxation of natural resources Political economy of the tax reform in LA So we could face two major challenges: Rebuilding the fiscal space Addressing the multiple dimensions of inequality in the region
Juan Pablo Jiménez juanpablo.jimenez@cepal.org ITC-Workshop How to Operationalize the International Tax and Development Agenda 12-14 September 2011 Bonn, Germany
LATIN AMERICA EVOLUTION OF THE TAX BURDEN AND GDP PER CAPITA, 1990-2009 (Percent of GDP and USD = 2000) 25 10.000 Growth Rate of Tax Revenue = 34.5% 9.000 Tax revenue (% of GDP) 20 15 10 14,0 3.605 15,0 3.790 15,7 16,2 16,7 3.983 4.060 4.076 18,3 4.569 18,9 4.849 8.000 7.000 6.000 5.000 4.000 3.000 GDP per capita (USD 2000) 5 2.000 1.000 0 1990-1992 1993-1995 1996-1998 1999-2001 2002-2004 2005-2007 2008-2010 0
2002-2010 1990-2001 Brasil Argentina Uruguay Nicaragua Bolivia Chile Honduras Perú Panamá Colombia Ecuador Venezuela Costa Rica El Salvador Rep. Dominicana Paraguay Guatemala México GROUP 1 GROUP 2 GROUP 3 0 5 10 15 20 25 30 35 Percentage of GDP Note: Coverage is for central government, except for Argentina, Brazil, Bolivia, Chile, and Mexico which refers to general government (including tax revenues of subnational levels of government)..
LATIN AMERICA AND THE CARIBBEAN: COMPOSITION OF REVENUE, 1990-2011 (Percentages of GDP) 20 18 16 14 12 10 8 6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(p) Other income Tax Revenue
LATIN AMERICA AND EUROPE: SELECTED COUNTRIES VOLATILITY OF TAX REVENUE (WITHOUT SOCIAL SECURITY) 1980-2008 (Standard deviation of the tax revenue growth in USD, 2000) 25,0 Latin America Developed countries 20,0 15,0 12,3 10,0 5,0 4,5 0,0 Venezuela Ecuador Costa Rica Peru Bolivia Argentina Panama Dominican R. Paraguay ElSalvador Guatemala Uruguay Nicaragua Chile Honduras Mexico Brazil Colombia Greece Iceland Portugal Finland Japan Sweden Spain USA Norway Netherlands Italy Australia United Kingdom Denmark Austria France Belgium
SELECTED LATIN AMERICAN COUNTRIES: REVENUE FROM COMMODITIES, 1990-2009 (Percent of GDP) 20 1990-1992 1999-2001 2007-2009 18 17,2 16 14 12 10 8 6 7,9 5,1 10,6 9,8 7,2 11,1 6,3 6,1 8,0 8,7 11,6 4 2 0 3,4 2,9 2,8 2,6 1,9 0,9 1,2 0,5 0,6 0,0 0,0 0,2 Argentina Bolivia Chile Colombia Ecuador México Perú Venezuela Source: ECLAC
LATIN AMERICA: FISCAL REVENUE AND EXPORT PRICES (1950-2010) (Percent of GDP) 20 180 Fiscal Revenue (% od GDP) 18 16 14 12 147 114 81 48 Unit value index of exports (2000=100) 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010(p) 15 Fiscale Revenue Export Prices
AMÉRICA LATINA : EVOLUCIÓN DE LA ESTRUCTURA TRIBUTARIA PROMEDIO, 1990-2009 (En porcentaje del total recaudado) Direct Taxes (Income + Property) 40 25,5 30,1 30 17,3 17,5 Social security contributions 20 10 0 VAT 22,8 35,1 20,3 14,1 5,7 International trade & transactions 11,6 Excises & others 1990 2009 Between 1990 and 2009, in the average tax structure at the regional level, the relative weight of indirect taxes (as VAT ) increased 54%, from 22.8% to 35.1% of total collections per year.
LATIN AMERICA, OECD and USA AVERAGE REVENUE OF INCOME TAX
SELECTED LATIN AMERICAN COUNTRIES: TAX EXPENDITURES, 2007 As percentage of Country GDP Tax Revenue Argen8na Brazil Chile Colombia Ecuador Guatemala Mexico Peru 2.21 8.90 2.29 9.10 4.97 24.60 3.52 22.00 4.60 35.30 7.91 63.50 5.92 50.70 2.05 11.90 The major methodological differences in the estimates of tax expenditures among countries restrict comparative analysis.
OECD AND LATIN AMERICA: SELECTED COUNTRIES COLLECTION COSTS AS A PERCENTAGE OF TAX COLLECTION, 2009 (per 100 currency units of recovery) 2,50 2,00 LAC Average= 1,66 1,50 1,00 OECD Average = 1,10 0,50 0,00 Argentina Brazil Chile Colombia Costa Rica Ecuador El Salvador Guatemala Mexico Paraguay Peru Dom. Rep. Uruguay Germany Canada Spain USA France Italy Netherlands Portugal United Kingdom Source: CIAT y Tax Administration in OECD and Selected Non-OECD Countries: Comparative Information Series 2010 (OECD, 2011).
Value-Added Tax Income Tax Tax Gap Year of estimation Tax Gap Total Individuals Companies Year of estimation Argentina 21.2% 2006 49.7% 2005 Bolivia 29.0% 2004 Chile 10.0% 2006 47.4% 46.0% 48.4% 2003 Costa Rica 28.7% 2002 Colombia 23.5% 2006 Ecuador 21.2% 2001 63.8% 58.1% 65.3% 2005 El Salvador 27.8% 2006 45.3% 36.3% 51.0% 2005 Guatemala 37.5% 2006 63.7% 69.9% 62.8% 2006 Mexico 20.0% 2006 41.6% 38.0% 46.2% 2004 Nicaragua 26.0% 2006 Panama 33.8% 2006 Peru 48.5% 32.6% 51.3% 2006 Dominican Republic 31.2% 2006 Uruguay 26.3% 2006
LATIN AMERICA TAX BURDEN, 1990-2001, 2002-2010 (Percentage of GDP)
6,0 5,0 4,0 3,0 2,0 1,0 0,0 LATIN AMERICA: INCOME TAX OF INDIVIDUALS AND COMPANIES, 1998-2009 (Percentage of GDP) 0,3 0,4 0,4 0,7 0,7 0,9 2,0 2,0 2,1 1,8 1,7 1,8 2,1 2,6 2,9 3,2 3,1 0,6 0,7 0,8 0,8 0,8 0,7 0,6 0,7 0,7 0,8 0,9 0,9 0,8 0,7 0,9 0,8 0,9 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1,1 2,8 Individuos Sociedades No clasificables Nota: No clasificables corresponde a los datos donde las cifras oficiales no distinguen entre individuos y sociedades The growth of the collection of income tax comes primarily from companies related to the exploitation of nonrenewable resources.
SELECTED COUNTRIES: STRUCTURE OF THE PERSONAL INCOME TAX, 2007 (Percentage of GDP)
Some issues related to fiscal policy: Undertake reforms, such as public management reform, that may be necessary to launch and fuel sustainable capacity development processes Strengthen public financial management capacity: Intensify efforts to mobilise domestic resources, strengthen fiscal sustainability, and create an enabling environment for public and private investments. Publish timely, transparent and reliable reporting on budget execution. Take leadership of the public financial management reform process. Strengthen as appropriate the parliamentary role in national development strategies and/or budgets
Some issues related to fiscal policy: Countercyclical policies should be expanded Public investment should be consistent with medium- and long-term fiscal sustainability Continue to undertake fiscal reform, including tax reform. Continue to improve budgetary processes and to enhance the transparency of public financial management and the quality of expenditures Enhance tax revenues through modernized tax systems, more efficient tax collection, broadening the tax base and effectively combating tax evasion Make tax systems more pro poor Promote international cooperation in tax matters