Institute for Regional Economy and Policy Analysis – IER
Reforming the governance of tax expenditures in Latin America
One of the three issues our research has identified that characterizes the management of tax expenditures in Latin America is decision-making processes that are opaque, closed to a limited number of actors, and not linked to the annual budget process. In this brief, we look at the ways in which governments decide upon and manage tax expenditures and the degree to which current arrangements allow for their effective use as fiscal policy instruments.
This publication is part of the LATERAL project, which has brought together a group of civil society organizations from across Latin America and the Caribbean to better understand and influence the ways in which governments use—or abuse—tax expenditures as tools for fiscal policy and economic development.
Counted But Not Accountable: Tax Expenditure Transparency in Latin America
Across Latin America, tax expenditures are reducing government revenues by between 10 and 20 percent, but adequate information on their objectives, beneficiaries, and ultimate impact is lacking. This brief looks at some more general data on transparency practices on tax expenditures and then presents the results of a mini-survey for Latin America to facilitate cross-country comparisons and encourage debate on areas in which governments need to improve on their tax expenditure transparency practices.
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Related
- Latin America Tax Expenditure Research, Advocacy, and Learning (LATERAL) project overview
- Tax Expenditures in Latin America: A Civil Society Perspective (January 2019)
- Evaluating Tax Expenditures: A Framework for Civil Society Researchers (June 2018)
- A Quick Guide to Researching Tax Expenditures in Latin America (June 2018)
- Tax Expenditures and Inequality in Latin America (June 2018)
Tax Expenditures in Latin America: A Civil Society Perspective
January 2019 | by Paolo de Renzio, International Budget Partnership
Tax expenditures — provisions that reduce the amount of tax that is paid by providing special treatment to a particular class of individual, industry, or activity — have been on the rise in Latin America and represent a reduction of between 10 and 20 percent in total revenues collected by governments, with questionable impact. While most Latin American countries publish a yearly report on tax expenditures, the information is often insufficient to allow for proper assessment and debate. And because tax expenditures are usually not negotiated as part of the regular budget process, decision-making around their design and approval is mostly opaque and prone to lobbying by powerful interest groups.
The available evidence on the impact of tax expenditures shows that they tend to generate economic distortions and worsen inequality. Thus, civil society groups are increasingly becoming interested in engaging with tax expenditures to hold governments accountable for this important and opaque area of public finance. The Latin America Tax Expenditure Research, Advocacy, and Learning (LATERAL) project, a collaborative research, capacity-building, and advocacy initiative spearheaded by the International Budget Partnership and ten Latin American civil society organizations, began formally examining these issues in 2016.
This paper (available in English and Spanish) summarizes the findings of the two main components of the LATERAL project: 1.) our research examining tax policy and tax expenditures in Latin America and the role that civil society can play in related debates; and 2.) country-level research on tax policy and tax expenditures in Latin America carried out by civil society partners.
Downloads
- Tax Expenditures in Latin America: A Civil Society Perspective – English (January 2019)
- Tax Expenditures in Latin America: A Civil Society Perspective – Spanish (January 2019)
Related
- Latin America Tax Expenditure Research, Advocacy, and Learning (LATERAL) project overview
- Evaluating Tax Expenditures: A Framework for Civil Society Researchers (June 2018)
- A Quick Guide to Researching Tax Expenditures in Latin America (June 2018)
- Tax Policy and Inequality in Latin America (June 2018)
- Tax Expenditures and Inequality in Latin America (June 2018)