CIAT 50th General Assembly: Past, present and future of tax administration

1. Taxation trends in Latin
America during the last 50
years
Miguel Pecho
Tax Studies and Research Directorate
CIAT Executive Secretariat
April, 2016

2. Total tax revenues
(In percentages of GDP, 2014)
Source: CIAT, ECLAC, IDB, OECD
34
21
13
14
14
16
17
18
18
19
19
20
20
20
20
23
27
29
32
33
0 10 20 30 40
OECD (34)
LAC (18)
Guatemala
Dominican Rep.
Mexico
El Salvador
Paraguay
Panama
Venezuela
Peru
Ecuador
Honduras
Chile
Colombia
Nicaragua
Costa Rica
Uruguay
Bolivia
Argentina
Brazil

3. Central Government Tax Revenues (*)
(In percentages of GDP, 1960-2014)
Source: Moran and Pecho (2016)
1960
9.7
1971
12.2
1981
13.4
1986
13.3
1989
11.7
2003
13.3
2007
15.6
2009
14.7
2014
16.2
9
10
11
12
13
14
15
16
17
1960 1966 1972 1978 1984 1990 1996 2002 2008 2014

4. Central Government tax structure (*)
(In percentages of total collection, 1960-2014)
Source: Moran and Pecho (2016)
34.0% 34.0% 31.1% 29.8% 31.1% 29.0% 27.8% 27.4% 28.0%
35.0% 37.4%
27.8% 31.4% 35.6% 36.6%
40.3% 44.4% 50.4% 54.9% 56.9%
53.1%
53.0%
32.9% 27.2% 24.7% 25.3%
20.3% 20.4%
17.2%
13.8% 10.4% 8.2% 6.3%
5.3% 7.4% 8.6% 8.3% 8.3% 6.2% 4.5% 3.9% 4.6% 3.7% 3.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 2010-14
PIT, CIT and Property Taxes VAT and other taxes over goods and services
Trade taxes Other taxes

5. Statutory tax rates in the "neoliberal" years
(In percentages, since 1985)
Source: Moran and Pecho (2016)
43.9
31.6
28.3 26.8
49.5
33.9
28.5 27.4
49.0
11.8
6.5
4.3
10.6
13.7 15.0 15.2
0
10
20
30
40
50
60
0
10
20
30
40
50
60
1985 1995 2005 2015
CIT PIT Average import tariff VAT

6. 6
• Financial transactions taxes.
• Minimum taxes on assets or gross income.
• SMEs tax regimes (i.e. single tax).
• "Reinforced" territorial taxes.
• Dual or semi-dual PITs.
• "Objective" transfer pricing regimes
• Taxes on extractive industries: windfall taxes; unified
taxes-royalties.
Heterodox taxes
(Regional contributions to tax design)

7. Tax administration: more institutionality
(Major milestones)
1970 1980 1990 2000 20101960
Taxpayers registry; Organization by functions; Automatic Data Processing (ADP); Tax
Procedures Codes; self-determination: greater need for guidance and tax assistance.
From ADP to information systems; account balance and
payments; VAT control and crossings of information;
large taxpayers units.
Autonomy; professionalization; planning
and analysis of processes; involvement in
the design of tax policy.
Tax administration in
the digital era;
international taxation
units; risk
management;
management of
human talent;
transparency and
accountability.

8. Redistributive capacity of the fiscal policy
(Gini coefficients before and after the fiscal action)
Source: ECLAC
0.51
0.47
0.48
0.30
0.42
0.24
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Market income Disposable income in cash Extended disposable income

9. The next 50 years
(Total tax revenues and GDP per capita in PPP (USD))
GDPpercapitainPPP(USD)->
Tax to GDP ratio - >
OECD
(1965:24.8% of
GDP)
LAC (2014: 20.7%
of GDP)
Source: CIAT, ECLAC, IDB, OECD

10. Personal Income Taxes
(Some legal parameters)
Source: CIAT, IBFD, OECD
Bottom
marginal
rate
Top
marginal
rate
Basic allowance
(times GDP per
capita)
Bracket of Top PIT rate
(times GDP per capita)
CIT
rate
Dividends
Argentina 9 35 1.4 1.5 35 10
Bolivia 13 13 2.1 - 25 -
Brazil 7.5 27.5 1.0 2.1 34 -
Chile 4 40 1.0 9.3 22.5 [4,40]
Colombia 19 33 2.3 7.3 39 -
Costa Rica 10 15 1.7 2.4 30 15
Ecuador 5 35 2.0 17.5 22 [5,35]
El Salvador 10 30 1.6 6.0 30 5
Guatemala 5 7 2.1 11.0 25 5
Honduras 15 25 3.6 10.7 30 10
Mexico 1.92 35 0.0 2.9 30 10
Nicaragua 15 30 2.5 11.0 30 10
Panama 15 25 1.2 4.6 25 10
Paraguay 8 10 9.6 10.5 10 5
Peru 8 30 1.5 11.3 28 6.8
Dominican Rep. 15 25 1.7 3.4 27 10
Uruguay 10 30 0.6 10.7 25 7
Venezuela 6 34 1.1 8.7 34 -
LAC (18) 9.8 26.6 2.1 7.7 27.9 8.7
OECD (34) 15.1 43.9 0.2 3.9 24.9 24.5

11. Source: Boston Consulting Group
Property taxes
(New impulse for the 21st century)

12. VAT: Who benefits?
(Impact of exemptions and reduced rates)
Source: IDB

13. 7.6
13.5
22.1
12.0
10.5
3.5
7.4
3.7
12.3
15.0
8.4
7.7
11.8
18.1
15.7
8.5
10.6
10
20
25
25
25
25
30
30
30
30
30
31
31
33
34
34
35
0 5 10 15 20 25 30 35 40
Paraguay (2012)
Chile (2012)
Bolivia (2012)
Ecuador (2010)
Panamá (2012)
Dominican Rep. (2005)
Costa Rica (2012)
Mexico (2012)
Nicaragua (2011)
Peru (2012)
Uruguay (2005)
Guatemala (2012)
Honduras (2012)
Colombia (2012)
Brazil (2009)
Venezuela (2012)
Argentina (2007)
Top CIT statutory rate
Effective burden based on Operational Surplus
Corporate Income Taxes
(Non-compliance gap)
Source: Pecho and Peragon (2014)

14. Multilateralism, legitimacy and taxation
(From a consultative role to a more active role in decision-making)
Global Forum on transparency and exchange
of information
Multilateral Convention on Mutual
Administrative Assistance in Tax Matters
Participation in the CFA and its subsidiary
bodies (BEPS Initiative)
AEOI: Multilateral Competent Authority
Agreement
Ad-hoc group for the development of the
multilateral instrument proposed by BEPS
Action Plan
Committee of experts on international
cooperation in tax matters of the UN

15. Taxation trends in Latin
America during the last 50
years
Miguel Pecho
Tax Studies and Research Directorate
CIAT Executive Secretariat
April, 2016