Fiscal Panorama of Latin America and the Caribbean • 2018
Tax burden of value added tax
8
Uruguay
Chile Bolivia (Plur. State of)
7
Peru
Paraguay El Salvador
Argentina
6
Nicaragua
5
Colombia
Guatemala
4
(Percentages of GDP and percentage of theoretical receipts)
Dominican Rep.
Costa Rica
Mexico
3
Panama
2 1 0
0
5
10
15
20 25 Value added tax evasion
30
35
57
Figure II.12 Latin America (14 countries): value added tax receipts and estimated rates of value added tax evasion, 2014 or most recent year with dataa
10 9
Chapter II
40
45
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Organization for Cooperation and Development/Economic Commission for Latin America and the Caribbean/Inter-American Center of Tax Administrations/ Inter-American Development Bank (OECD/ECLAC/CIAT/IDB), Revenue Statistics in Latin America and the Caribbean 1990-2015, Paris, OECD Publishing, 2017, for tax revenue figures; Gómez Sabaini, J. C., J. P. Jiménez and R. Martner, Consensos y conflictos en la política tributaria de América Latina, ECLAC Books, No. 142 (LC/PUB.2017/5-P), Santiago, Economic Commission for Latin America and the Caribbean (ECLAC), 2017; and official figures for estimates of VAT evasion. a The data presented, for both VAT receipts and evasion, are: from 2007 for Argentina; from 2010 for El Salvador; from 2012 for Mexico and Panama; from 2013 for Costa Rica, Nicaragua and the Plurinational State of Bolivia; and from 2014 for Chile, Colombia, the Dominican Republic, Guatemala, Paraguay, Peru and Uruguay.
In contrast, as noted above, not only are there much fewer estimates available for income tax, but greater levels of non-compliance by both individuals and corporations have been detected. To provide a comprehensive view of the extent of the problem across the region, ECLAC has estimated that in 2015, while VAT evasion amounted to the equivalent of 2.4% of regional GDP, income tax evasion totalled 4.3%, with which the region’s combined losses from the two taxes totalled some US$ 340 billion that year. A similar claim can be made with respect to the other taxes in force in the region’s countries, particularly those that account for significant revenues: social security contributions, selective taxes on certain goods and services and property taxes. The first of those represents a much more serious situation, in that it directly affects the funding of protection systems and their financial sustainability and, undeniably, has an impact on the quantity and quality of the benefits made available to the public (Gómez Sabaini, Cetrángolo and Morán, 2014). Moreover, in recent years, and in light of evidence of massive transfers of capital from their countries of origin to other jurisdictions, where they are kept to benefit from legal and tax advantages, there has been a growing interest in addressing the international dimension of tax evasion. This problem involves both multinational companies which, as global entities, seek to minimize the tax burdens they bear, and individuals from very high income brackets who, in addition to paying less tax, are able to conceal their assets in foreign countries, out of the reach of national revenue services. Fortunately, awareness has been increasing regarding the harmful effects of this phenomenon which, seen from the viewpoint of individual countries, leads to the erosion of domestic tax bases and undermines the overall efficiency and fairness of any tax system. To date, however, very little is known about the magnitude of this problem. Global studies produced by international agencies suggest that base erosion and profit shifting (BEPS) manoeuvres lead to extreme tax losses. For example, OECD (2015) estimated that the total net losses currently stood at between 4% and 10% of annual corporate income tax revenues, for a total of between US$ 100 billion and U$ 240 billion in 2014.