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Latin American tax revenues lower than OECD rates

3rd February 2014

MGI World Tax revenues in Latin America generally remain lower than those in the OECD

Latin American tax revenues are continuing to rise, according to new research, but they are still lower than in most OECD countries when it comes to tax as a proportion of national incomes. 

According to the third edition of Revenue Statistics in Latin America 1990-2012, the average tax revenue to GDP ratio in 18 Latin American and Caribbean countries rose gradually from 18.9 per cent in 2009 to 20.7 per cent in 2012. This comes after they dropped from 19.5 per cent, which had been a peak, in 2008.

The report demonstrated that the tax to GDP ratio is still lagging behind the OECD average, which stands at 34.6 per cent. Indeed, the region is seeing a tax to GDP ratio of 14 percentage points below this figure. Latin America also trails the US, where the figure is 24.3 per cent, according to a separate OECD report published in January.

However, the document did note that there are wide national variations occurring across Latin American countries. Argentina and Brazil, for example, are both above the OECD average, with figures of 37.3 per cent and 36.3 per cent respectively.

In contrast, Guatemala pays just 12.3 per cent, while the Dominican Republic’s rate stands at 13.5 per cent. 

This range compares to that of OECD countries, which stretched from 48 per cent in Denmark to 19.6 per cent in Mexico. 

It was also revealed that in 2012, the tax to GDP ratio increased in 13 of the 18 countries that the report investigated. Chile, Guatemala, Mexico and Uruguay, however, saw a drop in their rates, while Costa Rica stayed the same. 

The largest increases in these ratios during 2012 were seen in Argentina, Ecuador and Bolivia, while the biggest falls occurred in Uruguay. 

Furthermore, general consumption taxes - largely from VAT and sales - made up more of the tax revenues in the Latin American countries in 2011, with a figure of 33.8 per cent, compared to the 20.3 per cent in OECD nations. 

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