Taxation in Latin America From words and data to policy action. Angel Melguizo OECD Development Centre

Transcripción

1 Taxation in Latin America From words and data to policy action Angel Melguizo OECD Development Centre Wilson Center Latin American Programme Washington DC, April

2 Open data for better policies

3 Revenue Statistics and Taxing Wages in LAC Detailed, internationally comparable data on tax revenues and labour tax laws (including a simulator by income and family composition) in 20+ Latin American and Caribbean (LAC) economies Based on OECD Revenue Statistics and OECD Taxing Wages methodologies, but adapted to Latin America Joint projects with the Economic Commission for Latin America and the Caribbean (ECLAC), the Inter-American Centre for Tax Administrations (CIAT), and Inter-American Development Bank (IDB)

4 LAC countries continued their convergence process towards OECD taxation levels, despite the economic slowdown Total tax revenues in LAC and OECD, (Percentage of GDP) Difference B-A LAC (24) (A) OECD (35) (B) Source: OECD/ECLAC/CIAT/IDB (2017), Revenue Statistics in Latin America and the Caribbean

5 Wide national variations exist across LAC countries ( Americas Latinas ) Total tax revenues in LAC countries and OECD, 2015 (Percentage of GDP) Cuba Argentina Brazil Barbados Trinidad and Tobago Uruguay Belize Jamaica Bolivia Costa Rica Honduras Ecuador Venezuela Nicaragua Colombia Chile The Bahamas Paraguay Mexico El Salvador Peru Panama Dominican Republic Guatemala LAC OECD Source: OECD/ECLAC/CIAT/IDB (2017), Revenue Statistics in Latin America and the Caribbean

6 Tax structures continue to be based on indirect tax receipts (VAT and other taxes on consumption) Tax revenue composition in LAC and OECD, 2015 (Percentage of GPD and total tax revenues) Taxes on income and profits Social security contributions Property Taxes on goods and services Other taxes 0.9 p.p, (4%) 0.7 p.p. (2%) 6.2 p.p. (27%) 11.0 p.p. (32%) 11.5 p.p. (34%) 11.2 p.p. (49%) 0.8 p.p. (4%) 3.8 p.p. (16%) 1.9 p.p. (5%) 9.1 p.p. (27%) LAC (24) 1 OECD (35) 2 1. Represents a group of 24 Latin American and Caribbean countries. Chile and Mexico are also part of the OECD (35) group. 2. Represents the unweighted average for OECD member countries in the year Source: OECD/ECLAC/CIAT/IDB (2017), Revenue Statistics in Latin America and the Caribbean

7 Despite recent increases, personal income tax collection continues to be low (vs CIT) Personal and Corporate income tax revenues in LAC and OECD, 2015 (Percentage of GDP) PIT CIT Barbados Trinidad and Tobago Jamaica Mexico Argentina Uruguay El Salvador Brazil Cuba Belize Honduras Peru Panama Chile Costa Rica Colombia Dominican Republic Guatemala Paraguay Bolivia The Bahamas OECD LAC Note: the share on taxes on income and the share on taxes on profits may not add up to the total share on taxes on incomes and profits due to unallocable revenue. Only countries that could allocate 75% or more of revenue of taxes on incomes and profits into the sub categories taxes on income and taxes on profits are shown in the figure above. Source: OECD/ECLAC/CIAT/IDB (2017), Revenue Statistics in Latin America and the Caribbean

8 Fiscal revenues from non-renewable natural resources are (too?) important sources of revenue As % of GDP Fiscal revenues from non-renewable natural resources, 2015 (in billions of dollars and percentage of GDP) Mexico Brazil Venezuela Argentina Colombia Ecuador Bolivia Chile Peru Trinidad and Tobago Dominican Republic Suriname Jamaica

9 From data to policy action (I) Given the economic slowdown and weak commodity prices, a nopolicy change scenario suggests that tax revenues will not increase. Key to ensure the financing of education, infrastructure and social programmes. Tax reforms have to come, hand in hand, with improvements in their management. Latin American governments need to strive for more efficient, transparent and innovative services In focus tax reform and labour markets

10 Informality is pervasive, also within the emerging middle class. Could tax reform help? Labour informality in Latin America (Percentage of workers contributing to pensions, 2013) Quintil 1 Promedio Q2 - Q4 Quintil 5 Promedio ALC Q1 Promedio ALC Q2-Q4 Promedio ALC Q5 100% 90% 85% 80% 70% 64% 60% 50% 40% 42% 30% 20% 10% 0% GTM HND PER PRY NIC BOL COL ECU SLV MEX PAN DOM ARG VEN BRA URY CRI CHL Source: IDB (2015), Sistema de Indicadores de Mercado Laboral y Seguridad Social (SIMS)

11 Jamaica Nicaragua Peru Honduras El Salvador Trinidad and Tobago Dominican Republic Guatemala Bolivia Mexico Venezuela Colombia Ecuador Uruguay Paraguay Panama Brazil Costa Rica Chile Argentina LAC OECD Labour costs in LAC are generally lower than in OECD (wages & taxes) Labour costs in Latin America and OECD (Average wage earner; social contributions and personal income tax; 2013) Net wages Tax wedge Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

12 Labour costs are relatively low due to low taxes on wages (22% vs 36%) Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

13 explained by the personal income tax (average formal worker is exempted) Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

14 Personal income tax only taxes the top deciles Tax wedge by level of income in Latin America (Percentage of labour costs, 2013) Single worker, no children Married couple, two children Transferencias monetarias Impuesto a la renta CSS empleado CSS empleador Transferencias monetarias Impuesto a la renta CSS empleado CSS empleador Deciles de ingreso Deciles de ingreso Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

15 and even up there, average tax rates are modest Average personal income tax rate on the top decile in Latin America (Percentage of wage, 10th decile, 2013) Mexico Jamaica Trinidad and Tobago El Salvador Brasil Uruguay Panama Rep. Dominicana Nicaragua Peru Argentina Honduras Costa Rica Bolivia Ecuador Chile Guatemala Venezuela Colombia Paraguay ALC Soltero sin hijos Pareja casada con dos hijos Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

16 Employer contributions are alike in LAC and OECD Employer social contributions in Latin America and OECD (Average wage earner; % labour costs; 2013) Brazil Colombia Argentina Costa Rica Mexico Uruguay Nicaragua Dominican Rep Paraguay Panamá El Salvador Venezuela Bolivia Jamaica Ecuador Guatemala Peru Trinidad y Tobago Honduras Chile LAC OECD 0% 5% 10% 15% 20% 25% 30%

17 What about those who are informal? Calculating (tax) costs of formalisation Informality and theoretical tax costs of formalisation in LAC (Average LAC wage earner by income decile; % wages; 2013) Tasa de informalidad Costo teórico de formalización 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 0% Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean

18 Americas Latinas (once again) Chile Centroamérica Tasa de informalidad Costo teórico de formalización Tasa de informalidad Costo teórico de formalización 100% 100% 100% 100% 80% 80% 80% 80% 60% 60% 60% 60% 40% 40% 40% 40% 20% 20% 20% 20% 0% D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 0% Colombia 0% D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 0% Tasa de informalidad Costo teórico de formalización 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 0% Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean and IDB (2015), Sistema de Indicadores de Mercado Laboral y Seguridad Social (SIMS)

19 but tax and informality are correlated for low and middle-income workers Informality and theoretical formalisation costs for middle-income workers in Latin America B. Ingresos promedio de los deciles % 80% GTM HND NIC PER PRY BOL SLV MEX COL ECU 60% DOM ARG 40% 20% VEN CHL PAN CRI BRA URY 0% 0% 10% 20% 30% 40% 50% Costos de teóricos de formalización (como porcentaje del ingreso del individuo) Source: OECD/CIAT/IDB (2016), Taxing Wages in Latin America and the Caribbean and IDB (2015), Sistema de Indicadores de Mercado Laboral y Seguridad Social (SIMS)

20 From data to policy action (and II) Boosting good jobs (protected & productive) should be a central element of the policy (also fiscal) agenda Personal income tax can be strengthen (revising minimum exempted) and made more progressive (tax deductions, rates?) Revision of non-wage labour costs notably for low- and low-middle income workers should be evaluated. Progressive subsidies on social contributions?

21 From data and words to policy action