On 22 April 2021 the OECD published Revenue Statistics in Latin America and the Caribbean 2021 . This is a joint publication of the OECD with the Inter-American Center of Tax Administrations (CIAT), the Economic Commission for Latin America and the Caribbean (ECLAC) and the Inter-American Development Bank (IDB).
The statistics indicate that tax revenues decreased significantly in 2020 as a result of the decline in economic activity caused by the COVID-19 pandemic. The report notes however that fiscal policy has an important role to play in the Latin American region’s response to the pandemic. Tax policy can make a contribution to achieving a green and inclusive economic recovery.
In 2019 the tax-to-GDP ratios in the region rose to 22.9% on average, which was an increase of 0.3 percentage points on the previous year mainly due to increases in the Caribbean region. The tax to GDP ratios in 2019 ranged from 13.1% in Guatemala to 42% in Cuba. Of the countries surveyed, 14 registered an increase in their tax-to-GDP ratio in 2019 and the ratio decrease in 12 countries. All the countries except Cuba recorded tax-to-GDP ratios below the OECD average of 33.8%, although the gap between the LAC and OECD averages has decreased from 15.4 percentage points in 1990 to 10.9 percentage points in 2019.
The largest increases in tax-to-GDP ratios between 2018 and 2019 occurred in Nicaragua (a rise of 2.7 percentage points), Belize (2.2 percentage points) and the Bahamas (2.1 percentage points). The report notes that tax reforms in Nicaragua, the Bahamas and some other countries have been a strong contributor to the increases.
Tax policy in the pandemic
A special feature in the report looks at fiscal policy responses to the pandemic. Tax revenues decreased significantly during the first half of 2020 as a result of the collapse in domestic demand during the opening months of the pandemic. Revenues began to recover in the second half of the year as countries increased social protection, supported businesses and brought in temporary measures to ease tax liabilities. It is currently estimated that total tax revenues in 18 countries in the Latin American and Caribbean region decreased in 2020 by 11.2% on average compared to 2019.
Hydrocarbon and mining revenues
Another special feature in the report looks at hydrocarbon and mining revenues in 2019 and 2020. In the main producing countries the hydrocarbon revenues increased on average from 2.5% of GDP in 2018 to 2.7% in 2019. Government revenue from mining slightly decreased in the same period to an average of 0.37% of GDP. The initial estimates for 2020 indicate that fiscal revenues from non-renewable natural resources decreased significantly, mostly owing to steep reductions in oil prices and the effect of pandemic relief measures on corporate income tax payments in the mining sector.
Future tax policy
Tax policy will be important in the process of economic recovery after the pandemic. The policies on tax and spending in the region will need to support inclusive and sustainable growth while giving protection to vulnerable sections of society. The percentage contribution of personal income tax and social security contributions is well below the OECD average, while revenues from environmental taxes were only 1.2% of GDP on average in 2019 in the countries of the region for which data was available. There is therefore space for increases in personal income taxes, environmental taxes and social security contributions.