(12 June 2013) Investment in education, science, technology and infrastructure, along with improvements to the budgetary framework and better tax evasion controls, are key to raising the level of tax revenues in the region's countries, according to Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), speaking today in Mexico City.
The senior United Nations official was one of the main speakers at the International Seminar on Tax Policy: Challenges and Trends, organized by the Centre of Public Finance Studies (CEFP) of the Mexican Chamber of Deputies, in conjunction with ECLAC and the Organisation for Economic Co-operation and Development (OECD).
The meeting in the Chamber of Deputies was attended by Mexico's Under-Secretary for Revenue from the Secretariat of Finance and Public Credit, Luis Miguel Messmacher; the Tax Director of OECD, Grace Pérez-Navarro; Vice-President of the Presiding Officers of CEFP, Deputy Patricia Elena Retamoza; and the Director of the ECLAC Subregional headquarters in Mexico, Hugo Beteta.
According to Ms. Bárcena "Thanks to a series of reforms, the tax burden has moved in the right direction over the past decade, and this has facilitated a significant rise in social spending. [...] However, tax policy still has a low impact on countries' fiscal policies in general, which is reflected in the low level of tax receipts".
According to ECLAC data, the average tax burden of Latin American countries was just above 14% of GDP in the period 2000-2011, compared with 11.5% between 1990 and 1999, while the region's social spending rose from 10.2% of GDP in 1990-1995 to 14.3% between 2005 and 2010.
In Mexico, the tax burden decreased slightly in 2000-2011 to 9.3% of GDP, having risen to 9.6% in 1990-1999, while in Brazil the figure rose from 18.4% of GDP in 1997-1999 to 22.3% in 2000-2011. In Argentina, it rose to 16% in 2000-2011 (from 12.3% in 1990-1999) and in Chile it increased from 16.1% to 17.3% in the same time period.
ECLAC figures on all the region's countries with official information available show that social spending levels have risen in comparison with the five-year periods 1990-1995 and 2005-2010.
Cuba is the country that spends the most in this area, with 36.6% of GDP in 2005-2010, followed by Brazil (24.5%), Argentina (23%), Uruguay (21.4%), Costa Rica (19.3%) and Bolivia (17.5%). Chile's social spending was 13.9% in this period, while Mexico posted an average of 10.1%.
Ms. Bárcena stated "Increasing collection requires, inter alia, reducing tax expenditure, limiting special regimes, strengthening fiscal federalism and increasing income tax collection".
She added "We believe that public finances need to respond to a progressive fiscal policy. We must focus on investment (especially in human capital) and assign resources for future generations".
According to Ms. Bárcena "Mexico invests 23% of GDP in total, but investment in research and development stands at just 0.39%, which is much lower than other countries such as the United States (2.9%) and Sweden (3.4%). Mexico has the means to become a knowledge and information society".
She also emphasized that tackling cyclical fluctuations in the economy required reducing the dependency of fiscal revenues on the exploitation of natural resources: "We must discuss natural resource governance. It is vital to decide how to distribute the productivity resources generated from natural resource exploitation".
Regarding the fiscal covenant, Ms. Bárcena declared that it is essential to achieve a social agreement, based on the principle of reciprocity, concerning the origin, destination and composition of the resources needed to finance the State.
She affirmed "We must create a virtuous circle between collection, public management, accountability and empowerment of society, so that people see the concrete results of policies. This is the basis for a covenant. Also, Mexico has a unique opportunity to use a new perspective to achieve the right balance between State, market and society".
The Director of the ECLAC Subregional headquarters in Mexico, Hugo Beteta, addressed the seminar by presenting an analysis of the country's social accountability matrix that can be used to provide an ex ante assessment of some fiscal measures based on their impact on population deciles, with a view to supporting decision-making in a project of structural change for equality.
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