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Rises in Commodity Prices, VAT and Income Tax Increase the Tax Burden of the Region's Countries
From 2002, most Latin American and Caribbean countries saw a considerable expansion in their tax burden (tax income as a proportion of gross domestic product, GDP). Several countries also made major fiscal changes, such as the consolidation of Value Added Tax (VAT), improved participation in direct taxes and a reduction in levies on international trade. In the recent publication Fiscal Panorama of Latin America and the Caribbean. Tax reform and renewal of the fiscal covenant, ECLAC states that, between 2000 and 2011, the average tax burden in Latin American countries (including contributions to social security that is managed by the State) went from 15.4% to 19.1% of GDP. Excluding social security contributions, the proportion increased from 12.7% to 15.7% of GDP, while in the Caribbean the percentage rose from 19.3% to 23% in the same period. The countries with the largest increases in tax income in relation to the regional average were Argentina (from 25% of GDP in 2000 to 38% in 2011), Brazil (from 32.5% to 38.3% of GDP) and Uruguay (from 27.4% to 29% of GDP). Taken individually, Cuba is the country with the largest tax burden in the region (65.7% of GDP in 2011), followed by other Caribbean countries such as Suriname (43%) and Saint Kitts and Nevis (39.3%). These are followed by Brazil (38.3% of GDP in 2011), Argentina (38%) and the Plurinational State of Bolivia (34.5%). According to ECLAC, the tax burden has increased in the last decade for several reasons including the acceleration of world economic growth; the steady increase in international commodity and mineral prices from 2002 to 2009 (which pushed up fiscal revenues in many of the region's countries); and progress in VAT and income tax administration (which rapidly pushed up tax receipts). Although an increasing tax burden has been the common pattern in the region, the increases have been uneven as different countries implement varying tax policies. The ECLAC document shows that the general overview changes when we look at total fiscal revenues for the region's countries, as several States supplement their tax burden with considerable non-tax receipts from other sources or the exploitation of natural resources. The report states that, in countries specialized in the exploitation of natural resources, the period 2003-2010 saw an increase in the State's share in economic revenues and relative fiscal contribution of sectors exporting these non-renewables (minerals and hydrocarbons) - which was in contrast with the previous period (1990-2003). Trinidad and Tobago is the Latin American country with the greatest level of fiscal dependence on such resources, as they represented 45.8% of total revenues for the three-year period from 2009 to 2011. That country is followed by Venezuela (with 40% dependency), Ecuador (34.5%), Mexico (32.5%), Bolivia (29.9%), Chile (17.3%), Colombia (16.2%), Argentina (13.6%) and Peru (9.3%).
The report also points to major tax reform processes implemented in
the past five years (2007-2012), highlighting income tax amendments
of varying magnitude in many of the region's countries. In addition,
most of the region's countries have consolidated VAT as the main
source of tax receipts by extending it to intermediate and final
services, progressively increasing the rate and improving tax
administration..
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