Caribbean tax revenues rise despite low growth

Tax revenues in Latin America and the Caribbean countries continued to increase in 2015. New revenue statistics show that the average tax-to-GDP ratio in these countries reached 22.8 percent of GDP in 2015, up from 22.2 percent in 2014.

The average tax-to-GDP ratio across the 24 examined countries is currently 11.4 percentage points lower than the OECD average of 34.3 percent.

The difference between the OECD and Latin American and Caribbean countries is mainly due to lower tax collection on personal income taxes and social security contributions in the Latin America and the Caribbean (LAC) region. However, the difference between OECD and LAC tax-to-GDP ratios is gradually declining and is the smallest on record in 2015.

The report “Revenue Statistics in Latin America and the Caribbean” shows that surging revenues from value-added tax and excise taxes offset a decline of 0.2 percentage points in corporate income tax revenues and explain the overall increase in the region’s average tax-to-GDP ratio in 2015.

It was the first decrease in corporate income tax revenues across Latin American and Caribbean countries since 2011. In contrast, personal income tax revenue has reached its highest level, during the period covered in this report, at 2.1 percent of GDP.

Given the heterogeneity of countries in the region, there is a wide variation of tax-to-GDP ratios. They range from 12.4 percent in Guatemala and 13.7 percent in the Dominican Republic to 32 percent in Brazil, 32.1 percent in Argentina and 38.6 percent in Cuba, which is the only country that had a tax-to-GDP ratio above the OECD average.

However, a common feature in the region continues to be the reliance on indirect taxation as the main revenue source. Indirect taxation accounted for almost half (49 percent) of total tax revenue on average in LAC countries, compared with a third (33 percent) in OECD economies.

The share of corporate income tax revenues in LAC countries remained nearly twice as high as OECD levels at 16.8 percent of total tax revenues compared to 8.7 percent on average.

Personal income tax revenue, in contrast, was much lower in the region that in OECD countries – 8.8 percent and 24 percent respectively.

The report, produced jointly by the Inter-American Centre of Tax Administrations, the Economic Commission for Latin America and the Caribbean, the Inter-American Development Bank and the OECD, also measured the impact of declining commodity prices on fiscal revenues.

In particular, the substantial decline of oil prices reduced commodity-related revenues from 7.3 percent of GDP to 4.9 percent in 10 analyzed countries.

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