Taxes in Latin America: Do Wealth and Inequality Matter?

To meet pressing development challenges, Latin American states need fiscal resources. The good news is that in the last decade, favorable macroeconomic conditions and the design of better tax systems pushed up fiscal revenues in Latin America. According to the OECD Latin American Economic Outlook 2009, while some economies in the region have gone a long way to put their public finances in order, other countries face high budget deficits and public debts, striving hard to improve tax collection. Although revenue ratios at the levels seen in OECD countries are not necessarily meaningful targets for Latin America, comparing the region to industrial countries can be useful to assess the effectiveness of different tax policies. Low levels of personal income limit the scope for income taxes in Latin America: while they represent 27% of total tax revenues in OECD countries, they just contribute 4% in the region.