Public revenues rebound in Latin America

5 Apr 19

Tax and administrative reforms in the Caribbean drove a rebound in public revenues in Latin America in 2017, reflecting an overall recovery in the regional economy.

The average tax-to-GDP ratio in Latin America and the Caribbean rose to 22.8% in 2017, a gain of 0.2 percentage points from 2016, according to figures just published.

The Revenue Statistics in Latin America and the Caribbean 2019 report launched in Santiago, Chile, by the Inter-American Development Bank, attributes the rebound primarily to Guyana and Barbados.

The average tax-to-GDP ratio in Latin America remained 11.4 percentage points below the average of OECD member countries of 34.2% of GDP in 2017, but the difference has been shrinking consistently.

The IDB says year-on-year change was uneven across Latin America: while tax revenues increased as a proportion of GDP in 12 countries, they declined in 10 and remained unchanged in two.

Moreover, tax-to-GDP ratios across the Latin American and Caribbean region vary significantly, ranging from 12.4% in Guatemala to 40.6% in Cuba.

Green or environmentally related taxes are an emerging source of revenues, which averaged 1.1% of GDP from this source in the region compared to the OECD average of 1.6%.

In recent years, Chile, Mexico and Colombia have introduced significant green tax reforms.

However, Latin American and Caribbean governments continue to rely on taxes on goods and services for their revenues, with value-added taxes alone accounting for 27.9% of tax revenues on average in 2017, equivalent to 6% of GDP.

Over the past decade, corporate tax revenues have declined as a percentage of GDP whereas revenues from personal income tax have steadily increased, respectively reaching 3.4% and 2.2% of GDP on average in 2017.

  • Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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