Argentina and Brazil draw more taxes on goods and services than anywhere else in Latin America and the Caribbean, according to an OECD (Organization for Economic Cooperation and Development) report assessing tax collection in 18 countries across the region. Tax-to-GDP ratio in Argentina and Brazil – 37% and 36.6% respectively – is above the OECD average.
The report comes a day after Argentina announces plans to tax the goods its citizens purchase from international sites like Amazon or eBay. Goods purchased online will not reach their doorsteps directly; instead, they will end up at a customs office where the shopper will have to pay tax upon collection.
At the bottom of the list are Guatemala and the Dominican Republic, whose tax-to-GDP ratios stand at 12.3% and 13.4% respectively. According to the report, the average tax revenue-to-GDP ratio in the 18 Latin American and Caribbean countries increased steadily from 18.9% in 2009 to 20.7% in 2012, after falling from a high point of 19.5% in 2008.
The tax-to-GDP ratio has risen significantly across Latin American and the Caribbean over the past two decades – from 13.9% of GDP in 1990 to 20.7% of GDP in 2012. But the region’s tax-to-GDP ratio is still 14 percentage points below the OECD average of 34.6%.
Governments in Latin America typically collect less tax than their counterparts in the developed economies of Europe. For example, Mexico (19.6%) collects less than half as much tax-per-GDP as Denmark (48%).
For many Latin American countries, most state revenue comes from mineral exports, the report says, warning that such commodity income may prove to be less reliable given the ongoing volatility in global commodity prices.
Fiscal revenues from non-renewable natural resources continue to be very important as a percentage of total revenues, accounting for more than 30% of the total in Bolivia, Ecuador, Mexico and Venezuela. This implies both a greater benefit from the revenues they generate as well as a higher level of risk due to the dynamics of the global market.
Tax to GDP ratios
- In 2012, the tax to GDP ratio rose in 13 of the 18 countries covered; fell in four (Chile, Guatemala, Mexico and Uruguay) and remained unchanged in one (Costa Rica).
- The difference between the OECD average tax-to-GDP ratio and that for the 18 countries covered is currently around 14 percentage points, compared with 19 percentage points in 1990.
- The largest increases in tax-to-GDP ratios in 2012 were in Argentina (2.6 percentage points), Ecuador (2.3 points) and Bolivia (1.8 points).
- The largest falls in 2012 were in Uruguay (1.0 percentage point) and Chile (0.4 points)
- Over the 2007-2012 period, 11 countries recorded increases, the largest being in Argentina (8 percentage points), Ecuador (7 points) and Paraguay (4 points). There were declines in the other 7 countries, the largest being in Venezuela and the Dominican Republic (3 percentage points).