By: Staff Writer
May 21, 2024
The Inter-American Development Bank (IDB) in a recent report in conjunction with the Organisation for Economic Co-operation and Development (OECD) said that value added tax (VAT), corporate income tax (CIT) and social security taxes (SSC) all decreased in the Caribbean during 2021-2022, but conversely increased in Central America.
The report, “Revenue Statistics in Latin America and the Caribbean 2024,” said: Revenue from income taxes increased by 0.4 p.p. in the Caribbean, 0.5 p.p. in Central America and Mexico, and by 0.8 p.p. in South America. These increases were driven by CIT in all three cases. OCT (other consumption tax) revenue declined in all sub-regions. Changes in revenue from VAT, PIT (personal income tax) and SSCs varied across the sub-regions; the Caribbean was the only sub-region where revenue from all three categories declined between 2021 and 2022.
“In the Caribbean, the largest decreases in revenue as a share of GDP in 2022 were recorded in OCT (-0.6 p.p.). Revenue from other categories except for CIT decreased to a lesser extent (by – 0.2 p.p. for PIT, SSCs and property taxes in the ‘residual’ category and by -0.1 p.p. for VAT). CIT revenue grew 0.7 p.p., largely due to the increase in Trinidad and Tobago.”
The report added: “In Central America and Mexico and in South America, the largest increases in revenue as a share of GDP in 2022 were recorded in CIT (0.4 p.p. and 0.7 p.p. respectively). Revenue from PIT increased by 0.1 p.p. in both sub-regions. VAT revenue increased in South America by 0.1% of GDP and was unchanged in Central America and Mexico. In South America, the only revenue category that recorded a decrease was OCT, which declined by 0.1 p.p. This category declined in Central America and Mexico (by 0.3 p.p.) as well, where SSCs also fell (by 0.2 p.p.).”
The report compiles comparable tax revenue statistics over the period 1990-2022 for 27 Latin American and Caribbean (LAC) countries. It provides harmonised data on the level and structure of tax revenues based on the OECD classification of taxes, thereby enabling comparison of national tax systems on a consistent basis, both across the region and with other economies globally.
In addition, The average tax-to-GDP ratio in the LAC region was 21.5% in 2022. The highest tax-to-GDP ratios were observed in Brazil (33.3%), Barbados (30.5%) and Argentina (29.6%), while the countries with the lowest tax-to-GDP ratio were Guyana (10.6%), Panama (13.1%) and Dominican Republic (13.9%). All countries in the LAC region recorded a tax-to-GDP ratio below the OECD average of 34.0% in 2022.
The tax-to-GDP ratio rose in 20 countries in the region between 2021 and 2022 and declined in six countries. The largest increases were observed in Chile (up 1.7 percentage points from the previous year), the Bahamas (1.6 percentage points) and Ecuador (1.5 percentage points). The largest decrease (of 6.3 percentage points) occurred in Guyana, which was one of four Caribbean countries in the report where the increase in tax revenue was outpaced by GDP growth, causing the tax-to-GDP ratio to decline.