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Newsletter

eCIAT ISSN 1684-9833 • Year 6 / No. 3 / January 31, 2014

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The Executive Secretariat Informs New OECD-ECLAC-CIAT Report: “Revenue Statistics in Latin America 1990-2012”

Asamblea General del CIAT - Brasil, 2014

LATIN AMERICA: TAX REVENUES CONTINUE TO RISE, BUT ARE LOW AND VARIED AMONG COUNTRIES, ACCORDING TO NEW OECD-ECLAC-CIAT REPORT Argentina and Brazil have the highest tax revenue to GDP ratio, while Guatemala and Dominican Republic stand at the lower end.

The Executive Secretariat Informs New OECD-ECLAC-CIAT Report : “Revenue Statistics in Latin America 1990-2012” CIAT & EUROsociAL II: Balance of the 2013 activities The Tax Administrations Inform Brazil - Collection in 2013 reached R $ 1,138 billion, with 4.08 % real increase Costa Rica - Fiscal transparency in Costa Rica and actions to improve it Dominican Republic - DGII signs an agreement with Indotel to implement better mechanisms to facilitate tax functions Panama - Panamanian economy is strengthened Paraguay - The SET offers to citizens online videos for consulting on PIT Peru - Tax pressure reached a level of 16% in 2013 IBFD News Training New in the Web Other Documents of interest

Santiago, 20 January 2014 – Tax revenues in Latin American countries continue to rise but are lower as a proportion of their national incomes than in most OECD countries. The publication Revenue Statistics in Latin America 1990-2012 (third edition) shows that the average tax revenue to GDP ratio in the 18 Latin American and Caribbean countries covered by the report[1] increased steadily from 18.9% in 2009 to 20.7% in 2012 after falling from a high point of 19.5% in 2008.

The report, produced jointly by the Inter-American Centre of Tax Administrations (CIAT), the Economic Commission for Latin America and the Caribbean (ECLAC) and the OECD, launched today during the XXVI Regional Seminar on Fiscal Policy, which is being held at ECLAC headquarters in Santiago, Chile. It shows that the tax to GDP ratio rose significantly across Latin American and the Caribbean over the past two decades – from 13.9% of GDP in 1990 to 20.7% of GDP in 2012. But the tax to GDP ratio is still 14 percentage points below the OECD average of 34.6%.

Wide national variations exist across Latin American countries. At the upper end are Argentina (37.3%) and Brazil (36.3%), which are both above the OECD average, while at the lower end are Guatemala (12.3%) and Dominican Republic (13.5%). The corresponding range in OECD countries was from 48.0% in Denmark to 19.6%[2] in Mexico.

The share of tax revenues collected by local governments in Latin America is small in most countries and has not increased, reflecting the relatively narrow range of taxes under their jurisdictions compared with OECD countries.

A special chapter in the report describes the trends driving revenues from non-renewable natural resources across Latin America. Increased global demand for commodities, especially in large emerging markets, has led

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to sharp price increases and greater fiscal revenues associated with nonrenewable natural resources. While these revenues increased at a faster rate than other government revenues before the crisis, their performance has been roughly 3 times more volatile than overall tax-to-GDP growth since 2000.

In many Latin American countries, fiscal revenues from non-renewable natural resources continue to be very important as a percentage of total revenues, accounting for more than 30% of the total in Bolivia, Ecuador, Mexico and Venezuela. This implies both a greater benefit from the revenues they generate as well as a higher level of risk due to the dynamics of the global market.

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Main findings: Tax to GDP ratios • •

CIAT is a public international organization which groups the tax administrations of 38 countries, (31 Amarican countries, 5 European countries, 1 African countries and 1 Asian country. India is an associate members), for the purpose of providing an integral service for the modernization of those administrations, by promoting their evolution, social acceptance and consolidation through the exchange of knowledge, experiences and the rendering of specialized technical assistance.

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Tax structures •

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In 2012, the tax to GDP ratio rose in 13 of the 18 countries covered, fell in 4 (Chile, Guatemala, Mexico and Uruguay), and remained unchanged in one (Costa Rica).

The difference between the OECD average tax to GDP ratio and that for the 18 countries covered is currently around 14 percentage points, compared with 19 percentage points in 1990.

The largest increases in tax to GDP ratios in 2012 were in Argentina (2.6 percentage points), Ecuador (2.3 points) and Bolivia (1.8 points).

The largest falls in 2012 were in Uruguay (1.0 percentage point) and Chile (0.4 points) Over the 2007-2012 period, 11 countries recorded increases, the largest being in Argentina (8 percentage points), Ecuador (7 points) and Paraguay (4 points). There were declines in the other 7 countries, the largest being in Venezuela and the Dominican Republic (3 percentage points).

Following strong growth over the past twenty years, general consumption taxes (mainly VAT and sales taxes) accounted for 33.8% of tax revenues in the Latin American countries in 2011 (compared to 20.3% in OECD countries). The share of specific consumption taxes (such as excises and taxes on international trade) declined to 17.7% (versus 10.7% in the OECD).

Taxes on income and profits accounted for an average 25.4% of revenues in 2011 across Latin America, while social security contributions represented 16.9% (in the OECD, comparable figures are 33.5% and 26.2% respectively).

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CIAT & EUROsociAL II: Balance of the 2013 activities During the first year of implementation of the EUROsociAL II Program, CIAT, as an operative partner for Latin-America, in coordination with the FIIAPP, the AEAT and the Institute of Fiscal Studies of Spain, have carried out nine activities on a South-South basis, within the framework of the Action called “Voluntary Compliance with Tax Obligations” of the “Public Finance” Area of such Program.

These activities counted on the participation of 13 countries in Latin America (Argentina, Bolivia, Brazil, Colombia, Chile, Costa Rica, Guatemala, Ecuador, El Salvador, Mexico, Paraguay, Peru and Uruguay), have been mostly developed under the modalities of exchange visits, specialized consultancies, meeting and training course.

Among the main topics which have been requested to the program by tax administrations as strategic priorities, we could mention the following: • • • • • • • • •

Control of transfer pricing abusive manipulation; simplified taxation systems; electronic invoicing; international tax information exchange; massive controls; registration of taxpayers; information services and assistance to the taxpayer; Quality management in tax administrations and Human talent management

After these first support actions, which have allowed exchanging experiences and good practices related to tax administrations key processes; a number of issues have been identified which will be implemented as program projects during the current year. Among them the following could be highlighted: • The improvement of taxpayer assistance, based on best information mechanisms and use of technologies (Argentina, Bolivia, Brazil, Chile, Guatemala, Mexico, Peru and Uruguay); • The increased levels of quality in the main tax administrations processes (Bolivia, Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Paraguay, Peru and Uruguay); • The reinforcement of tax administrations control capacity, both massive and selective (Argentina, Bolivia, Colombia, Chile, Costa Rica, Guatemala, El Salvador, Mexico, Paraguay, Peru and Uruguay).

Based on this experience, for 2014, EUROsociAL sets new goals to efficiently contribute with the tax administration reform processes that each country has prioritized.

CIAT thanks the EUROsociAL II Program partners for the opportunity to participate as an “operative partner” for Latin America, and all those tax administrations of our member countries that have actively contributed to the development of all these actions, entrusted the program, and provided a high commitment level.

Thanks to each and every one of the actors, we have been able to end 2013 with a positive balance of actions; that motivates us to achieve new goals in 2014, which could result in concrete benefits for our member countries.

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For more information on the activities carried out, please visit the following links: 1.

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Assistance for implementing electronic invoicing in Paraguay Assistance to Costa Rica for the strengthening of HR in the tax administration South-South exchange visit on Transfer Pricing Bilateral exchange visit on simplified tax regimes South-south encounter on taxpayer registry South-south exchange visit on massive control South-south exchange visit on information services and taxpayer assistance South-south exchange visit on exchange of information units and procedures Training course on quality management in the tax administrations

The Tax Administrations Inform

Brazil - Collection in 2013 reached R $ 1,138 billion, with 4.08 % real increase The Receita Federal Secretary, Carlos Alberto Barreto, announced the results of the federal taxes collection and social security contributions for December 2013, and the 2013 accumulated results.

The Receita Federal in 2013 reached the amount of R $ 1,138 billion, which in comparison with the total amount collected in 2012 - R $ 1,029 billion - represents a nominal increase of 10.60%, and a real increase (with based on IPCA) of 4.08 %.

Last year revenues administered by the Receita Federal reached a total of R $ 1,100 billion, which represents a 10.90% nominal growth rate (4.36 % based on the IPCA calculation, when comparing with the total amount of R $ 992,089 billion collected in 2012).

December - Last December the collection of Receita Federal reached R $ 118.3 billion, an increase of 8.25 % over the same month of 2012. Part of this growth relates to the extraordinary income related to the debt installments allowed by Law 12.865/2013. The total for December reaches R $ 116,164 million in revenue administered by the Receita Federal, with an additional R $ 2,200 million administered by other agencies.

Mr. Marcelo Gomide, Adjunct Coordinator for Forecast and Analysis, explained that the actual collection for the month reaches R.$ 114,754,000, excluding a total of R $ 1,409 million collected in installments as allowed by Law 12.865/13, in addition to R $ 2,200 million administered by other agencies.

Optimism - For Secretary Carlos Alberto Barreto, collection numbers for last year allow to predict “a very positive perspective for the 2014 collection.” In his view, last year in general the industry had a “very good” performance.

He said that for early January the collection was very positive, without being able to forecast amounts for the first quarter, which, he said, “has always been quite atypical.”

Flávio Antonio Araújo Correspondent

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Costa Rica - Fiscal transparency and actions to improve it The Ministry of Finance promotes fiscal transparency as a priority, since it is the main means for informed decision-making and accountability to the citizens on the destination of public resources, the financial situation of the country and the public procurement of goods and services.

As a result, Costa Rica has obtained significant achievements in the field of fiscal transparency: in just four years we have gone from being considered a no cooperating jurisdiction to be an exemplary country in the Latin American region for the progress in this matter.

Maribel Z煤帽iga Cambronero Correspondent

Dominican Republic - DGII signs an agreement with Indotel to implement better mechanisms to facilitate tax functions The General Directorate of Internal Revenue (DGII) and the Dominican telecommunications Institute (INDOTEL) signed an agreement to facilitate and optimize the control and collection actions in the telecommunications area in accordance with the powers granted by law.

The agreement signed by the Director-General of internal revenue, Guarocuya Felix and INDOTEL President, Mr. Gede贸n Santos, has as a main objective the commitment to implement a collaboration mechanism for exchanging information and establish the responsibilities for both institutions.

Nieves Vargas Collado Correspondent

Panama - Economy is strengthened The economy of Panama continues with a positive growth in different sectors that move to the country as evidenced by the indicators from the National Institute of Statistics and Census of the General Comptroller of the Republic, which reported to the media of social communication, through a breakfast, the Secretariat of Economic Affairs and Competitiveness of the Presidency of the Republic.

Gina G贸mez, Project Coordinator of the Secretariat for Economic Affairs and Competitiveness, said that the Gross Domestic Product (GDP) in Panama grew 8.9% in the third quarter of 2013, achieving 8.0% between January and September of 2013; similarly, the Foreign Direct Investment was of 2 thousand 962 million dollars, until the third quarter of 2013, when in 2012, was 2 thousand 887.4 million dollars.

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Paraguay - The SET offers to citizens online videos for consulting on PIT In the Sub-secretary of State Taxation (SET) a significant increase of consultations on the Personal income tax by taxpayers and future contributors. This shows the interest of citizens for voluntary tax compliance.

The increase in consultations is due to that persons who have completed the range, i.e. that their income in 2013 have been equal to or greater than 179,089,056 Guarani, must register for the PIT, having up to 30 days after overcoming the mentioned amount to be registered.

Elizabeth Fernรกndez de Corrales Correspondent

Peru - Tax pressure reached a level of 16% in 2013

the Central Reserve Bank.

The central government tax revenue increased 3.3% in real terms in the year 2013. The collection of internal taxes grew 2.9% and customs duties in 4.7%. With these results in 2013, a tax pressure of 16.0% was reached, considering the nominal GDP reported by

This way, the level of tax pressure in 2012 was maintained, which is the highest level recorded in the past years.

Also, the year 2013 tax pressure is 0.6 percentage points higher than 15.4% of GDP projected by the Ministry of Economy and Finance.

Clara Urteaga Correspondent

IBFD News International Bureau of Fiscal Documentation (IBFD) Cooperation- CIAT - IBF

This section includes a selection of the IBFD news about aspects of tax policies and tax administration. This information is available on the CIAT website and in Fridays Tax News alert.

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Training As part of our commitment to support the human talent development within the TAs, we have started the registration process for the courses that begin in the first half of 2014.

Last days to register in the Tax Administration Diploma 2nd. The course will be offered in Spanish.

New in the Web Bibliographic News January, 2014

This document provides for reference purposes, the most recent documents produced by CIAT and other editorials in the month of January; either articles or other periodic publications, research works and studies of interest.

Other Documents of interest “Panorama Fiscal de América Latina y el Caribe 2014: Hacia una Mayor Calidad de las Finanzas Públicas”

Fiscal Panorama of Latin America and the Caribbean: Towards better quality for Public Finances ECLAC 2014 The present document is organized in three chapters. The first chapter examines some trends of Public Finances in Latin America and the Caribbean. We observe that in general public balances have deteriorated in the last years, but public debt has been kept stable. Tax revenues keep increasing, especially those from the income tax, which has been strengthened in the recent tax reforms. In addition, environmental protection is progressively considered in tax and subsidies policies (spanish only).

Global Rebalancing: A Roadmap for Economic Recovery Hamid Faruqee, Krishna Srinivasan Fondo Monetario Internacional 2013

The chapters describe and evaluate key indicators agreed on by the G20 for identifying large imbalances, including public and private debt and private saving, and countries’ external position.