Tax evasion and avoidance represent a significant loss of resources that are necessary to implement comprehensive care policies and systems, highlights the ECLAC along with ICRICT

The Deputy Executive Secretary of the ECLAC, Raúl García-Buchaca, mentioned ECLAC’s calculations that estimate tax evasion and avoidance in around 6 points of Latin America’s GDP, which represents a significant loss of resource for a region that needs to widen the fiscal space to galvanise policies oriented to the fulfilment of the Regional Gender Agenda. During his intervention in the side event ‘Regional cooperation to put an end to tax evasion and avoidance and mobilise resources for care policies in Latin America and the Caribbean’, that took place in the context of the XV Regional Conference on Women in Latin America and the Caribbean, García-Buchaca also pointed out that tax evasion and avoidance cannot be faced without strengthening cooperation and multilateralism to reform the international financial governance by means of agreements that become urgent.

The side event was organised by the Economic Commission for Latin America and the Caribbean (ECLAC), through its Division for Gender Affairs, and the Independent Commission for the Reform of International Corporate Taxation (ICRICT), with the support of the Wellspring Philanthropic Fund. The inauguration was in charge of the Deputy Executive Secretary for Management and Programme Analysis of the ECLAC and of Manisha Mehta, Director of the Women’s Rights Program of the Wellspring Philanthropic Fund, and had the moderation of Ana Güezmes García, Director of Division for Gender Affairs of the ECLAC.

After the opening remarks, the panellists made their interventions: Ricardo Martner, ICRICT Commissioner, Mariana Rulli, Advisor of the Secretariat of Equality and Diversity Policies of the Ministry for Women, Gender and Diversity of the Government of Argentina, José Antonio Ocampo, Minister of Finance and Public Credit of the Government of Colombia and Claudia Sanhueza, Undersecretary of Finance of the Government of Chile.

During the opening remarks, García-Buchaca also mentioned some of ECLAC’s complementary recommendations on the subject. These refer to, for example, strengthening the estimation of tax evasion to provide information to policy makers and modernizing the tax frameworks to include the most recent good practices on international taxation, strengthening transfer pricing rules, anti-abuse regulations and controls on foreign assets. Likewise, he pointed out that when a gender perspective is absent from social expenditure or investment policies, women are the ones who cushion the effects of the multiple crises through an intensification of care work.

For her part, the Director of the Women’s Rights Program of the Wellspring Philanthropic Fund said that we have witnessed an increase of wealth concentration, which means that the challenge is not the lack of resources but the willingness to implement more progressive tax policies to finance the care economy.

Subsequently, Ana Güezmes García, referred to the call from ECLAC to go beyond the agreement achieved at the heart of the OCDE and the G20 to push for a global minimum on corporate taxation of 15% and to widen the universe of companies to which the agreement will apply. She also mentioned Our Common Agenda (2021) from the Secretary General of the United nations, in which, among many other initiatives, he proposes a new joint structure on financial integrity to combat illicit financial flows. The membership of this structure would be centred around the United Nations, the international financial institutions, the OECD, the main financial centres and civil society organisations. It is then expected that it would be a structure with multilateral participation and that a dialogue around these topics would be generated.

During his intervention in the panel, Ricardo Martner, ICRICT Commissioner, pointed out that at global level 40% of the profits of multinational companies end up in fiscal havens. Subsequently, he referred to the Inclusive Framework on base erosion and profit shifting (BEPS) of the OECD and the G20, which currently involves around 150 jurisdictions around the world. One of the mechanisms of this framework attempts to rectify the fact that many large companies do not pay taxes where the sales take places but in jurisdictions with lower corporate tax rates. Likewise, he added that this generates a race to the bottom. The other mechanism of this framework refers to the global minimum on corporate taxation of 15%. A step in the right direction, but insufficient to stop the shifting of profits and the race to the bottom. In this regard, the ICRICT Commissioner ended the first part of his intervention referring to the important recommendations of the High-Level Panel on International Financial Accountability, Transparency and Integrity (FACTI) of the United Nations, so that developing countries and emerging economies can benefit more from the new regulations in international taxation. Martner added that according to a study done in Chile, the avoidance of income from capital or of the taxes of high incomes amount to 4.5 points of the GDP. For this reason, it is interesting that the tax reform in this country wants to include a wealth tax.

Afterward, Mariana Rulli, Advisor of the Secretariat of Equality and Diversity Policies of the Ministry for Women, Gender and Diversity of the Government of Argentina, said that to face the problem of illicit financial flows it is needed to support multilateralism and cooperation among States, and that this conference is a space to search for these agreements that are crucial to promote it. She also described the experience of the Interdepartmental Board of Policies and Care (Mesa Interministerial de Políticas y Cuidados). This board gathers 15 government agencies such as the ministries of Health, Development and Education and the National Statistical Office. Among the most important measures that the board has taken, she mentioned: the calculation of the monetary value of unpaid domestic work as a share of GDP; the law of Comprehensive Health Care during Pregnancy and Early Childhood (Atención y Cuidado Integral de la Salud durante el Embarazo y la Primera Infancia), known as the law of the 1000 days; the programme for the recognition of care work for women that wanted to access retirement; the creation of the federal map of care and the program Registradas to encourage the registration of domestica and care workers; the implementation of the first national survey on time use and unpaid work; the regulation of the article of the employment contract law that relates to care spaces in firms; and the submission of the project of a Comprehensive Care System.

For his part, the Minister of Finance and Public Credit of the Government of Colombia, José Antonio Ocampo, noted that regarding avoidance, the tax reform contributes to decrease it through a series of additional measures such as criminal legislation, and pointed out that regarding BEPS, with the reform Colombia stablished the effective minimum tax to companies of 15%. He also spoke about the necessity to develop a stronger framework on regional tax cooperation, for which he hopes that ECLAC will be one of the actors, alongside other that are interested in supporting this initiative. He added that he has already initiated conversations with some ministers of the region, such as the Minister of Finance of Chile, Mario Marcel. The minister concluded pointing out that the care economy will be one of the main topics of the new government and hopes to have it as one of the leading productive sectors, and in this regard, highlighted initiatives such as the one from the Municipality of Bogota, which has been one of the most innovative when putting in place more public care centres.

In her intervention, the Undersecretary of Finance of the Government of Chile, Claudia Sanhueza, mentioned that lowering evasion and avoidance –that amounts to 8% of GDP in this country– is a fundamental part of the tax reform proposal submitted to the parliament. The measures to lower evasion and avoidance are oriented to cut down tax exemptions, eliminate some legal loopholes and strengthen the inspectors. With respect to the international dimension, it was proposed to modify a regulation on preferential tax regimes, establishing that jurisdictions will be consider as such if they do not have information exchange agreements or that having them, impose limitations on effective exchange and that are not consider as compliant or substantially compliant according to the Global Forum on Transparency and Exchange of Information. Likewise, a modification to the regulation of passive rents was proposed, which considers, for example, family relations between people at the moment of calculating the exempted amounts. Lastly, the regulation on over-indebtedness was modified as well, which would establish as a non-accepted expense interests paid. After refereeing to the tax collection topics of the reform project, she pointed out that when expenditures on social policies are proposed (which include the construction of a national care system), this would contribute to closing gender gaps. In addition, tax deductions for care expensed were proposed.

The Deputy Executive Secretary for Management and Programme Analysis of the ECLAC, closed the event saying that ECLAC’s next Seminar on Fiscal Policy could serve to make the first coordination steps towards strengthening international cooperation on the topics of tax evasion and avoidance.

Broadcast of the event: https://www.youtube.com/watch?v=tXCEqKvtVEg