A new Organisation for Co-operation and Economic Development (OECD) report indicates that countries in the Latin America and Caribbean (LAC) region are contributing taxes at a lower level than the OECD.
The OECD pulled together tax revenue data for countries around the world—including 26 Latin American and Caribbean (LAC) countries, where tax revenue as a per cent of GDP is on average 11 percentage points lower than in other regions.
The research indicates that, on average, the tax-to-GDP ratio for 25 countries (excluding Venezuela which was not available) was 23.1 per cent, compared to the OECD average of 34.3 per cent.
From all the LAC countries only Cuba (42.3 per cent) recorded a tax-to-GDP ratio higher than the OECD average.
The regional OECD report on tax revenue statistics in LAC countries covers the years 1990 to 2018.
The report said that between 1990 and 2018, the average tax-to-GDP ratio in LAC countries has risen steadily each year, with three exceptions (1991, 1996 and 2009), increasing by more than seven percentage points, from 15.9 per cent to 23.1 per cent.
In 2018, Cuba (42.3 per cent), Barbados (33.1 per cent), and Brazil (33.1 per cent) had the highest tax-to-GDP ratios of the 25 countries covered. Guatemala (12.1 per cent), Dominican Republic (13.2 per cent), and Paraguay (14 per cent) had the lowest.
In general, countries in Central America and Mexico typically had lower tax‑to‑GDP ratios, at an average of 21 per cent, while countries in the Caribbean had higher tax‑to‑GDP ratios at an average of 25.7 per cent.
For South American countries the average ratio was 23.1 per cent, the same as the LAC average.
Taxes on goods and services were on average the greatest source of tax revenue for LAC countries, at 50.5 per cent of total tax revenues in 2017, compared to one-third in OECD countries.
VAT contributed on average 27.6 per cent, making it the most important tax on goods and services in LAC countries. Corporate and individual taxes accounted, on average, for another 27.3 per cent of all tax revenue.
In general, LAC countries have relatively higher reliance on corporate and consumption taxes. Between 1990 and 2018, revenue sources have shifted to VAT (increase of 11.6 percentage points of total taxes) and individual and corporate taxes (increase of 8 percentage points of total taxes).