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Latin America: Tax Evasion Slows Down Development, ECLAC Warns

  • ECLAC Secretary Alicia Barcena at a press conference, Santiago, Chile, May 12, 2020.

    ECLAC Secretary Alicia Barcena at a press conference, Santiago, Chile, May 12, 2020. | Photo: EFE

Published 7 July 2020

Tax default is high at a time when Latam governments need more resources to fight COVID-19.

The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that the current tax evasion reaches US$325 billion in Latin America.


Latin America's Post-COVID Economy Would Take Years to Recover

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.

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."

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