Latin American Narrows Tax Gap With Wealthy Nations

  • 20 Nov 2012
  • By The Economist Intelligence Unit

Brazil Driving Improvement, But Mexico Lagging

Led by Brazil's "success story," Latin American countries have narrowed the gap with wealthier nations in terms of tax collection, though Mexico remains a laggard, according to the Economist Intelligence Unit.

Tax revenue as a proportion of Gross Domestic Product totaled 19.4% for Latin America in 2010, up from 13.9% in 1990, Economist Intelligence Unit analysts wrote recently, citing a report jointly produced by the Organization for Economic Co-operation and Development and two other groups.

Latin America's increase reflects economic growth and a strengthening of fiscal authorities and tax administrations across the region, driven by "substantial gains" in Brazil. The country "has consistently led the region in terms of tax collection for most of the period under review," the analysts said.

Still, Latin America compares poorly with OECD countries, where tax revenue in 2010 was nearly 34% of GDP. In Mexico, tax collection rose only marginally over the past two decades, mostly because of energy taxes. "Mexico's sub-par performance is attributable to its narrow tax base, high levels of informality and a weaker fiscal administration than in many other countries in the region," the analysts said.

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