CARIBBEAN-Economic recovery and higher commodity prices drive a rebound in LAC tax revenues.

SANTIAGO, Chile, CMC – Tax revenues as a share of gross domestic product (GDP) in Latin America and the Caribbean (LAC) rebounded to their pre-COVID-19) pandemic level in 2021 amid economic recovery and higher commodity prices, according to a new report released here.

Titled “Revenue Statistics in Latin America and the Caribbean 2023,” reveals that the average tax-to-GDP ratio in the LAC region rose by 0.8 percentage points in 2021 to 21.7 percent, which is the same level as in 2019, before the COVID-19 pandemic.

The LAC average tax-to-GDP ratio remained lower than the Organisation for Economic Cooperation and Development (OECD) average of 34.1 percent of GDP in 2021 by 12.5 percentage points.

The new report shows that tax-to-GDP ratios in the LAC region ranged from 12.7 percent in Panama to 33.5 percent in Brazil in 2021. The percentage increased in 18 25 countries between 2020 and 2021 and declined in the remaining seven countries.

The most significant increase was observed in Belize, up to five percentage points from the previous year, which benefited from a recovery in tourism-related revenue.

The most significant decline was observed in Guyana, where nominal GDP rose by 47 percent in 2021 amid a sharp increase in natural resource production. Tax revenues rose by 16 percent, resulting in a 4.5 percentage points decline in the tax-to-GDP ratio.

After falling by 0.7 percentage points in 2020 at the height of the pandemic, revenues from taxes on goods and services bounced back across the LAC region in 2021, rising by 0.8 percent of GDP on average.

Taxes on goods and services remained the primary source of tax revenues in the LAC region in 2021, accounting for 50 percent of total tax revenues on average, with value-added tax accounting for 29.9 percent. Income taxes generated 26.7 percent of total tax revenues, with revenues from corporate income tax accounting for 15.4 percent.

According to the new report, the hydrocarbon and mining sectors have significantly boosted public revenues in the LAC region.

Hydrocarbon-related revenues in the major oil producers rose from 2.1 percent of GDP on average in 2020 to 2.6 percent in 2021 and an estimated 4.2 percent in 2022.

Mining revenues in major mineral producers rose to 0.68 percent of GDP in 2021 and an estimated 0.70 percent in 2022.

Revenue Statistics in Latin America and the Caribbean 2023 is a joint publication by the Inter-American Center of Tax Administrations (CIAT), the Inter-American Development Bank (IDB), the United Nations Economic Commission for Latin America and the Caribbean (UN-ECLAC), the OECD Centre for Tax Policy and Administration and the OECD Development Centre.