Red de Desarrollo Social de América Latina y el Caribe
Plataforma virtual para la difusión de conocimiento sobre desarrollo social

Fiscal inclusive development: Microsimulation models for Latin America


Autor institucional : IDRC, UNDP
Autor/Autores: Carlos M. Urzúa
Fecha de publicación: 2012
Alcance geográfico: Latinoamericano
Publicado en: México
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Resumen: The macroeconomic performance of Latin America and the Caribbeanduring the first decade of the new Millennium was remarkable. During 2000-2008, the average annual GDP growth in the region was 4.3%, a much larger figure than the growth rates obtained in the previous four decades. In 2009, as a result of the financial crisis, there was a decline of around 2%, but the region rebounded after that with an average growth rate close to 6% in 2010, and rates higher than 4% in 2011 and 2012. One of the main impacts of those macroeconomic achievements occurred on social indicators. According to ECLAC, the incidence of poverty decreased in the region from 48.4% in 1990 to 31.4% in 2010, while extreme poverty decreased from 22.6 to 12.3 percent during the same period. Furthermore, income inequality also showed significant improvements across most countries in the region. Even more remarkable, by 2010 the region as a whole had met over 80% of the goals set in the United Nations Millennium Declaration. Those achievements were not only the result of that economic growth, but also of the expansion of social spending, the increase in coverage of social policies and the establishment of human capital investment schemes. Nevertheless, deep social disparities still prevail in the region, and there is no way to solve that problem without strengthening the tax systems, in order to allow for higher levels of social spending. Indeed, the tax effort in the region is very low: in 2010 the average tax burden was only 16.7% of GDP. Furthermore, the tax structure is quite regressive for international standards: on average, the consumption tax collection almost doubles the income tax revenue. Is there any space to have new tax reforms in the region? If so, what are the most adequate reforms in terms of their impacts on tax collection and social welfare? The answers to these questions depend on thespecific characteristics of each country. For instance, Guatemala has a per capita income level almost four times smaller than Mexico’s, but the tax burden is quite similar in both countries (excluding oil revenue in the case of the latter); on the other hand, the tax system in Guatemala is much more regressive than in Mexico.



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