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Call made for reduction of tax evasion in Latin America, Caribbean

Tuesday, March 26, 2019

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SANTIAGO, Chile (CMC) — The Economic Commission for Latin America and the Caribbean (ECLAC) is reiterating the importance of reducing high level of tax evasion and illicit financial flows into the region.

In its latest publication, titled, Fiscal Panorama of Latin America and the Caribbean 2019, ECLAC highlighted the role of tax policy in fulfilling the United Nation's 2030 Agenda for Sustainable Development.

“Increasing public revenue is key to strengthening fiscal policy's capacity for action and bolstering the mobilisation of resources to finance the 2030 Agenda,” ECLAC said in the report which analyses current fiscal trends, the evolution of fiscal policies and their future challenges.

It added that that tackling the high level of tax non-compliance and illicit financial flows in the region were “more necessary than ever”.

According to ECLAC's latest estimate, the regional cost of tax evasion and avoidance amounted to 6.3 per cent of Gross Domestic Product (GDP) in 2017, which is equivalent to US$335 billion dollars, while the illicit flows stemming from the manipulation of international trade in goods reached US$85 billion dollars in 2016, or 1.5 per cent of regional GDP.

According to the report, tax policy has gained traction as a tool to boost progress towards the achievement of the goals of the 2030 Agenda for Sustainable Development.

“It not only has an impact on the level of available resources, but also on multiple dimensions of the Sustainable Development Goals (SDGs), such as inequality, poverty, and the well-being of women, older persons, youth and other vulnerable populations,” the report stated.

“In this sense, the challenges that countries face in this area represent significant barriers to achieving sustainable and inclusive economic development,” it added, analysing the taxation and oversight of the digital economy in the region in order to demonstrate the weaknesses that favour the erosion of fiscal revenue.

In particular, it reviews the unilateral measures that countries in the region have adopted in an effort to close loopholes for tax avoidance and collect tax on digital economy activities.

The document also presentented the current state of corrective environmental taxes to address matters of public health in Latin America and the Caribbean, as well as the use of fiscal incentives and preferential tax treatments that limit the mobilisation of resources but that, “if oriented in an effective way toward investment, could allow for contributing to the targets set forth in the SDG”.

With regard to the current context, Fiscal Panorama 2019 indicates that the fiscal consolidation process in Latin America and the Caribbean continued during 2018.

In the Caribbean, the report notes the level of gross public debt has declined, although it remains high, having fallen from 74.3 per cent of GDP in 2017 to 72.4 per cent of GDP in 2018.

The report says that an increase in tax collection and revenue from other sources in the Caribbean, including Citizenship by Investment Programme (CBI) pushed up total revenues, which reached 27.6 per cent of GDP in 2018 versus the 26.3 per cent recorded in 2017.


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