Latin America needs to strongly increase resources to meet development objectives, and since one of the problems is insufficient tax collection, it must increase direct taxes, such as income taxes and also those that levy property and environmental taxes, said today the OECD.
In its Outlook report on Latin America and the Caribbean published this Monday, the Organization for Economic Cooperation (OECD) recalls that the financing gap to meet the goals of sustainable development has been calculated for that region at an average of 99 billion dollars. annual.
And to respond to these shortcomings, tax revenues in 2022 represented only 21.5% of the gross domestic product (GDP).
Although there are notable differences within the region (from 10.6% in Guyana to 33.3% in Brazil), overall tax revenues that finance public services, infrastructure or social welfare programs were well below the average of 34%. in the OECD, and had even decreased slightly compared to 21.9% in 2016.
Another characteristic of the Latin American tax system is the great relative weight of indirect taxes (48% of the total, compared to 32% in the OECD), which are the most regressive, that is, they relatively tax more those who have fewer resources.
The OECD advises, among other things, to contribute to the redistribution of wealth, to expand taxes on real estate, which represented 0.4% of GDP in 2022, compared to 1% in the OECD.
Also increase environmental taxes, which amounted to 0.9%, half that of the OECD.
The authors of the report, which is published to coincide with the high-level meeting of the steering committee of the OECD Development Centre, also point out the significant burden of debt service, which has risen in recent years and represented all the region 12.2% of tax revenues in 2022, compared to 9.8% in 2012, and well above the 4.8% in the OECD.
The situation is very diverse by country, depending on the level of public debt (between 23% and 140% of GDP), but this debt service reaches 30% in Mexico and exceeds or is around 20% in the Dominican Republic, El Salvador, Bahamas, Costa Rica and Colombia.
The OECD emphasizes that, beyond public finances, to channel private resources towards development it is essential to have solid and inclusive financial markets, something that does not happen in Latin America and the Caribbean, where “they are lagging behind.”
This is illustrated by the fact that although the percentage of adults with a bank account has increased from 29.6% in 2011 to 57.2% in 2021, it is still below the OECD average (93.7%) and the services offered by the sector are much more expensive, with a net interest margin of 5%, compared to 1.7% in the OECD.
Capital markets constitute an “untapped” resource to finance investments in the region because they are small, heterogeneous and concentrated in a few hands, the report adds.
The stock market capitalization in 2022 was 35.9% of GDP there compared to 64.7% in OECD countries, and in addition 1% of shareholders controlled 46% of the total shares (compared to 31% in the OECD as a whole). organization).
What’s more, the size of these equity markets has been reduced in the last two decades because large Latin American companies migrate to more advanced markets and access for SMEs is limited. The region’s corporate bonds were equivalent in 2023 to only about 2% of the global total.
For the authors of the study, the countries of the region would benefit if they pooled their development priorities and financing, particularly to mobilize private money from international mechanisms.
What is known as the ‘developed countries club’ insists that the socioeconomic context of Latin America and the Caribbean, marked by very low productivity and high levels of poverty, hinders efforts to mobilize more internal income.
Its labor productivity in 2023 remained at 33% of that of the OECD, that is, a percentage lower than the 40% in 1990.
Despite the decline in recent decades, in 2023 22.5% of the region’s inhabitants were poor, slightly less than the 25.8% in 2016.
With information from EFE.
Follow us on Google News to always stay informed
Follow information about the world in our international section
