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Noticias y actividades

September 2016

9/30/2016

Taxing Wages in Latin America and the Caribbean 2016

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Taxes on the labour income of the average worker in Latin American and Caribbean (LAC) countries totalled 21.7% of total labour costs in 2013, one-third lower than in OECD countries, where the average was 35.9%, according to the first edition of Taxing Wages in Latin America and the Caribbean. More than 90% of the difference between LAC and OECD is due to personal income tax (13% of total labour costs).

The new report, covering 20 LAC countries, was produced jointly by the Inter-American Centre of Tax Administrations (CIAT), the Inter-American Development Bank (IDB), the Development Centre and the Centre for Tax and Policy Administration both of the Organisation for Economic Co-operation and Development (OECD).

The relatively low level of the LAC tax wedge - which measures the difference between an employer's labour costs and an employee's corresponding net take-home pay - reflects very low average personal income tax (PIT) rates. In fact, Mexico was the only country included in the report where workers had to pay PIT at the average wage level. In comparison, PIT represented 13.3% of the labour costs of an average worker in OECD countries. In the LAC region, the vast majority of the working population have incomes below the minimum PIT thresholds due to generous specific allowances. The prevalence of informal labour markets and tax evasion also contribute to the low levels of PIT revenues.

For more information and to download the report: Ver