SANTIAGO, Chile, CMC – Tax revenue rose as a share of gross domestic product (GDP) on average across Latin America and the Caribbean (LAC) countries between 2021 and 2022 due partly to a sharp increase in revenue from the oil and gas sector.
The new report titled “Revenue Statistics in Latin America and the Caribbean 2024” was released Tuesday at the 36th Regional Fiscal Seminar.
It 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 Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration and the OECD Development Centre.
The report showed that the average tax-to-GDP ratio in the region rose by 0.3 percentage points to 21.5 percent in 2022.
This was slightly below its level prior to the COVID-19 pandemic, when in 2019, it was 21.6 percent, and below the average tax-to-GDP ratio for the Organisation for Economic Co-operation and Development (OECD) countries, estimated at 34.0 percent of GDP.
The report notes that tax-to-GDP ratios in the LAC region ranged from 10.6 percent in Guyana to 33.3 percent in Brazil in 2022.
Between 2021 and 2022, the tax-to-GDP ratio rose in 20 countries in the region and declined in six. The largest increases were observed in Chile, up 1.7 percentage points from the previous year, the Bahamas, 1.6 percentage points, and Ecuador, 1.5 percentage points.
The most significant decrease of 6.3 percentage points occurred in Guyana, one of four Caribbean countries in the report where the increase in tax revenue was outpaced by GDP growth, causing the tax-to-GDP ratio to decline.
The increase in Latin America and the Caribbean’s average tax-to-GDP ratio in 2022 was driven by revenue from corporate income tax (CIT), which rose by 0.6 percentage points from the previous year.
The increase in CIT was solid among the ten major hydrocarbon producers included in the report, which benefited from higher profits derived from a surge in oil and gas prices in 2021 and 2022, according to the report.
Hydrocarbon-related tax and non-tax revenue in significant oil and gas producers rose to 4.4 percent of GDP on average in 2022 from 2.6 percent of GDP in 2021 before declining to an estimated 3.9 percent of GDP in 2023 as oil and gas prices trended down.
Revenue from minerals rose to 0.75 percent of GDP in 2022 before declining to an estimated 0.5 percent in 2023. Revenue from other tax types was either unchanged or dropped as a share of GDP on average across the region in 2022.
Notably, revenue from taxes on goods and services declined by 0.3 percentage points on average due to a fall in revenue from excises amounting to 0.4 percentage points caused partly by tax measures to mitigate the impact of high energy prices.
In 2022, taxes on goods and services generated almost half of the total tax revenue in the region, compared with less than a third in the OECD (31.9% in 2021). On average, CIT and personal income tax accounted for 18.8% and 9.2% of total tax revenue, compared with 10.2 percent and 23.7 percent in the OECD.
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