Aguirre, Carlos, and Parthasarathi Some , “The Mexican Value-Added Tax (VAT): Methodology for Calculating the Base,” National Tax Journal, Vol. 41 (December 1988), pp. 543-54.
Bird, Richard M. , “Tax Reform in Latin America: A Review of Some Recent Experiences,” Latin American Research Review, Vol. 27 (1992), pp. 7-36.
Bird, Richard M., and M. Casanegra (1992), Improving Tax Administration in Developing Countries, International Monetary Fund, Washington D.C., pp. 1-15.
Canto, Gilberto de Ulhoa , “Brazil: The Constitutional Tax Reform 1988,” International Bureau of Fiscal Documentation, Vol. 43 (1989), pp. 379-82.
Centro Interdisciplinario de Estudios sobre el Desarrollo Latinoamericano (CIEDLA), Finanzas Públicas en América Latina. Un Análisis de los Sistemas Impositivos (Buenos Aires, 1995).
Durán, Viviana, and Juan C. Gómez-Sabaini , “Lecciones sobre Reformas Fiscales en Argentina: 1990-1993,” paper presented at the sixth seminar of the Comisión Económica para América Latina y el Caribe (CEPAL) (Santiago de Chile, January 1994).
Faria, a. and Z. Yucelik (1995), “The Interrelationship between Tax Policy and Tax Administration,” in P. Shome , ed., Tax Policy Handbook, International Monetary Fund, Washington D.C., pp. 267-272.
González-Cano , ed., Armonización Tributaria del Mercosur: Ensayos sobre los Aspectos Tributarios en el Proceso de Integración (Centro Interamericano de Tributación y Administratión Financiera (CITAF) (Buenos Aires, 1996).
Grunberg, Isabelle , “Double Jeopardy: Globalization, Liberalization, and the Fiscal Squeeze,” World Development, Vol. 26, No. 4 (1998), pp. 591-605.
Harberger, Arnold C , “Introductión,” in Bolivia 1952-1986, by Jeffrey Sachs and Juan A. Morales, International Center for Economic Growth (San Francisco, 1988).
King, Mervyn , “Visions of the Tax Systems of the 21st Century,” International Fiscal Association Proceedings, 50th Congress (Geneva, 1996); Kluwer Law International, The Hague (1997).
Morrisset, Jacques, and Alejandro Izquierdo , “Effects of Tax Reform on Argentina’s Revenues,” World Bank Working Paper No. 1192 (Washington, September 1993).
Perry, Guillermo, and Ana Maria Herrera , eds., Public Finances, Stabilization and Structural Reform in Latin America, Inter-American Development Bank (Washington, 1994).
Rodriguez, Flavia , “Tax Reforms in Latin America 1978-1992: A Comparative Analysis,” Social and Economic Studies, Vol. 42 (1993), pp. 1-23.
Shome, Parthasarathi , “Trends and Future Directions in Tax Policy Reform: A Latin American Perspective,” Bulletin for International Fiscal Documentation Vol. 46 (September 1992), pp. 452-66.
Shome, Parthasarathi “Recent Tax Policy Trends and Issues in Latin America,” in Policies for Growth: The Latin American Experience, International Monetary Fund (Washington, 1995a) pp. 141-75.
Shome, Parthasarathi ed., Comprehensive Tax Reforms: The Colombian Experience, Occasional Paper No. 123, International Monetary Fund (Washington, 1995b).
Shome, Parthasarathi “A 21st Century Global Carbon Tax,” Bulletin for International Fiscal Documentation, Vol. 50 (November/December, 1996), pp. 481-89.
Shome, Parthasarathi, and Paul Bernd Spahn , “Value-Added Tax in Brazil,” in Value-Added Tax in India: A Progress Report, ed. by P. Shome (Centax Publications, New Delhi, 1997), pp. 145-68.
Tanzi, Vito “Corruption, Governmental Activities and Policy Instruments: Brief Review of the Main Issues,” in Fiscal Policy, Public Policy and Governance, ed. by P. Shome (Centax Publications, New Delhi, 1997), pp. 27-35.
Tanzi, Vito “The Impact of Economic Globalization in Taxation,” Bulletin for International Fiscal Documentation, (August/September, 1998), pp. 338-43.
Toro, Juan , “Aspectos Exitosos y Lecciones de Reformas Tributarias en Chile,” paper presented at the sixth seminar Comisión Económica para América Latina y el Caribe (CEPAL) (Santiago de Chile, January 1994).
Turro, John , “Latin America Concludes Decade of Successful Tax and Economic Reforms,” Tax Notes International (August, 1993), pp. 382-86.
Woldemarian, Assegedech , “Tax Tables,” in P. Shome edited, Tax Policy Handbook, International Monetary Fund, Washington, D.C., 1995.
Paper prepared for the 1999 annual fiscal policy conference of the United Nations Commission for Economic Policy in Latin America (CEPAL), in Brasilia, Brazil. Helpful comments from colleagues Messrs. George Kopits, Emil Sunley, and Vito Tanzi are gratefully acknowledged. Nevertheless, the author is solely responsible for the views expressed, which do not necessarily reflect those of any other individual or of the IMF, unless otherwise indicated. Ms. Assi Waldemariam assisted in updating Tables 1–7 from Shome (1992, 1995a).
In fact, in Latin America, the average top rate had fallen to 28 percent in 1994 and then climbed back to 34 percent in 1997. In a way, this reveals an intention to increase progressivity in recent years. Nevertheless, as argued later in the paper, it is perhaps even more important with equity in mind, to reduce exemptions and deductions from the personal income tax in the future.
In fact, this trend began in the 1980s, the ratio being as low as 0.46 in 1985-86.
For example, it fell from 36.5 percent in 1992 to 35.5 percent in 1994, the subsequent decline to 27.6 percent in 1997 being more rapid.
Whenever possible, general government data are presented. Otherwise, central government data are used. Some countries are excluded for reasons of data availability or interpretation, however. Also, revenue from petroleum has been separated for the sake of maintaining comparability of nonpetroleum revenue across countries.
Some caution should be used in making cross-country comparisons. First, in some countries GDP could be underreported, as recent upward revisions of GDP series in some countries often reveal. Second, the method of reporting tax revenue collection may not be the same in every country. For example, in Bolivia, VAT revenue does not exclude all VAT credit (as VAT credit is given through vouchers that can be used for subsequent tax payments), thus overestimating revenue. Though this correction has been made here, perhaps other variations remain. For example, social security may have been privatized in some countries such as Chile, so that it would not appear as a tax, though the contribution remains. Again, information on local government revenue is often incomplete, making international comparisons of general government revenue difficult. Nevertheless, they provide broad indicators and useful lessons for policymakers.
Table 8 has taken 1992 as the starting point: if general government revenue was above 20 percent, they are in the high-tax group. If general government revenue (and central government revenue in the case of countries highly dependent on petroleum revenue) was 10 percent or below, they are in the low-tax group. If the ratio was between 11–20 percent, they are in the medium-tax group.
The framework presents both the tax and expenditure sides, encompassing the dual problems of correspondence between tax policy and its administration, and expenditure policy and its control.
It is all the more puzzling, therefore, that tax administrators tend to successfully protest against linking administrative reforms to a quantification of their revenue impact.
For simplicity, we shall use tp, ta, ep, and ec to essentially denote the tax policy, tax administration, expenditure policy and expenditure control variable, respectively.