Tax default reaches 6.1 percent of Gross Domestic Product (GDP) at a time when the region's treasuries need more resources to deal with the pandemic-induced crisis.
"This high level of tax evasion is one of the main barriers to greater domestic resource mobilization in the region," the ECLAC stressed.
“It is one of the main obstacles affecting public finances and, therefore, the development process."
Reports point to corporate and individual income taxes as the main source of evasion, for it represents 3.8 percent of GDP.
We need to move towards a universal basic income. This is essential. After the pandemic we are going to be poor, we are going to be unequal, we are going to have hunger and we are going to be angry. So we’d better do something right now: @aliciabarcena in #HLPF2020. pic.twitter.com/SkrKr9d2MK
Public spending is important to avoid the consequences stemming from the economic slowdown and health preventive measures, which harm growth prospects although those policies are necessary to stop the pandemic spread.
So far, Latin America has spent just over 3 percent of its GDP on incentives and subsidies. Therefore, the ECLAC highlighted the importance of curbing tax evasion as soon as possible.
“Revenue losses represent a major challenge from the responsiveness of fiscal policy to macroeconomic shocks point of view. Also, it affects domestic resources mobilization aimed at financing sustainable development."