Latin America stands as one of the world's most unequal regions, grappling with economic, social, and environmental challenges that urgently require increased revenues. In 2021, tax collection in Latin American and Caribbean (LAC) countries averaged just 21.7% of GDP, significantly lower than the 34.1% average for OECD members. This gap is fueled by a combination of inadequate progressive taxation and a flawed international tax system.
Multinational corporations and the wealthiest individuals often exploit existing tax rules to minimize their liabilities, exacerbating inequalities and eroding trust in the rule of law. The current international tax framework, largely established by wealthy nations over a century ago, disproportionately benefits these countries and their affluent citizens. This outdated system not only perpetuates economic disparities but also stirs demagogic sentiments and undermines societal cohesion.
Recognizing these challenges, the African Group at the United Nations has proposed a resolution to initiate new negotiations on international tax cooperation. The goal is to develop fairer rules that better represent the interests of developing economies. Such reforms are crucial for enabling governments to generate the necessary revenue to fund sustainable development, climate initiatives, infrastructure projects, and to address social inequality and sovereign debt crises.
For LAC countries, the UN's active role in reshaping global tax policies is a welcome development. Previous efforts under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) have fallen short, particularly for nations in the Global South, due to a lack of inclusivity and flawed decision-making processes. Many believe that the BEPS reforms, even if implemented, will not provide the substantial and sustainable revenue needed to support developing regions.
As the push for a more equitable international tax system gains momentum, Latin America eyes these new negotiations as a pivotal opportunity to bridge the tax collection gap and drive meaningful progress toward economic equality and sustainable growth.
Reference(s):
cgtn.com
