European Commission
Implementation of tax reforms in developing countries
Brussels - May 16th, 2014
Fiscal policy in emerg...
Fiscal policy in emerging and developing economies
Some experiences from Latin America
2
Making fiscal reform happen in de...
Fiscal policy in emerging and developing economies
A conceptual framework
3
Tax policy cannot be analyzed separately from ...
Fiscal policy in emerging and developing economies
Some experiences from Latin America
4
Making fiscal reform happen in de...
Diagnostic and design: good tax data is needed…
5
Tax revenue over GDP
Source: OECD-ECLAC-CIAT (2014), Revenue Statistics ...
Diagnostic and design: good tax data is needed…
6
Tax revenues
(%GDP, 2012)
Source: OECD-ECLAC-CIAT (2014), Revenue Statis...
Diagnostic and design: good tax data is needed…
7
Source: OECD-ECLAC-CIAT (2014), Revenue Statistics in Latin America 1990...
Diagnostic and design: … coupled with good analysis
8
Source: OECD (2008), Latin American Economic Outlook 2009
Inequality...
Diagnostic and design: … coupled with good analysis
9
Source: OECD (2010), Latin American Economic Perspectives 2011. How ...
Diagnostic and design: … coupled with good analysis
10
Source: OECD (2011), Latin American Economic Outlook 2012: Transfor...
Fiscal policy in emerging and developing economies
Some experiences from Latin America
11
Making fiscal reform happen in d...
Implementation: effectively putting in place a reform
demands
12
• Technical capacity
• Improving fiscal frameworks
• Data...
Implementation: the lack of technical capacity is very costly
13
PPP renegotiations are the norm in emerging and developin...
Implementation: the role of fiscal frameworks
14
Fiscal policy tends to be pro-cyclical in Latin America…
Output gap and v...
Implementation: the role of fiscal frameworks
15
… and very sensitive to the political cycle
Source: Nieto-Parra, S. and J...
Implementation: the role of fiscal frameworks
16
Rules seem to be working, at least during the last crisis (e.g.
Chile and...
Implementation: the role of fiscal frameworks
17
Overall, the 2006 round of elections did not impact that much
Primary bal...
Fiscal policy in emerging and developing economies
Some experiences from Latin America
18
Making fiscal reform happen in d...
Approval: citizens’ support is low
19
Latin America (and most emerging and developing regions)
exhibits a low tax morale
S...
Approval: gaining citizens’ support, from the middle
20
A particularly relevant segment of the population is the
emerging ...
Approval: gaining citizens’ support, from the middle
21… but today they conform an unsatisfied majority
Source: OECD (2010...
Fiscal policy in emerging and developing economies
Some experiences from Latin America
22
Making fiscal reform happen in d...
Thank you!
www.oecd.org/dev
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Fiscal policy reform in emerging economies: experiences from LAC

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  • Fiscal policy reform in emerging economies: experiences from LAC

    1. 1. European Commission Implementation of tax reforms in developing countries Brussels - May 16th, 2014 Fiscal policy in emerging and developing economies Some experiences from Latin America Ángel Melguizo Head, Americas Desk OECD Development Centre
    2. 2. Fiscal policy in emerging and developing economies Some experiences from Latin America 2 Making fiscal reform happen in developing and emerging economies • Diagnostic and design • Implementation • Approval
    3. 3. Fiscal policy in emerging and developing economies A conceptual framework 3 Tax policy cannot be analyzed separately from expenditures • Budget constraint • Political economy: willingness to pay higher taxes vs. perceived public services Main approaches • Tax-benefit analysis : • How fiscal policy affects households’ incomes? • How fiscal policy is perceived by citizens? • Macro-analysis (e.g. infrastructure and fiscal policy)
    4. 4. Fiscal policy in emerging and developing economies Some experiences from Latin America 4 Making fiscal reform happen in developing and emerging economies • Diagnostic and design • Implementation • Approval
    5. 5. Diagnostic and design: good tax data is needed… 5 Tax revenue over GDP Source: OECD-ECLAC-CIAT (2014), Revenue Statistics in Latin America 1990-2012 Tax revenues over GDP in LAC have been converging to OECD levels since 1990… 0 5 10 15 20 25 30 35 40 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Difference (A-B) LAC (A) OECD(34) (B)
    6. 6. Diagnostic and design: good tax data is needed… 6 Tax revenues (%GDP, 2012) Source: OECD-ECLAC-CIAT (2014), Revenue Statistics in Latin America 1990-2012 … but there are significant differences in terms of composition, and among Latin American economies Tax structure (%GDP, 2012) 0 10 20 30 40 OECD (34) LAC (18) Guatemala Dominican Republic Venezuela El Salvador Honduras Paraguay Peru Panama Nicaragua Colombia Mexico Ecuador Chile Costa Rica Bolivia Uruguay Brazil Argentina 25.4 16.9 33.8 17.7 6.2 Impuestos sobre la renta y las utilidades Contribuciones a la seguridad social Impuestos generales sobre el consumo Impuestos específicos sobre el consumo Otros impuestos 33.5 26.2 20.3 10.7 9.3 AL (18) OCDE (34)
    7. 7. Diagnostic and design: good tax data is needed… 7 Source: OECD-ECLAC-CIAT (2014), Revenue Statistics in Latin America 1990-2012 Statistics should take into account the regional specificities (e.g. commodities, social insurance schemes, federalism) 0 20 40 60 80 100 Bolivia (E.P.) Peru Chile Ecuador Argentina Colombia Venezuela (R.B.) Brasil México 7.7 12.2 3.3 3.1 14.7 2.8 4.4 9.8 2.2 %GDP PEMEX Fiscal revenues from non-renewable resources (billion USD and %GDP)
    8. 8. Diagnostic and design: … coupled with good analysis 8 Source: OECD (2008), Latin American Economic Outlook 2009 Inequality in Latin America and the OECD (Gini indexes before and after taxes and public spending)
    9. 9. Diagnostic and design: … coupled with good analysis 9 Source: OECD (2010), Latin American Economic Perspectives 2011. How middle-class in Latin America? Tax-benefit structure by household income deciles (Percentage of the decile mean disposable income) Chile Mexico -40% -20% 0% 20% 40% 60% 80% 100% 120% I II III IV V VI VII VIII IX X Taxes Social spending Net transfers -40% -20% 0% 20% 40% 60% 80% 100% 120% I II III IV V VI VII VIII IX X Taxes Social spending Net transfers
    10. 10. Diagnostic and design: … coupled with good analysis 10 Source: OECD (2011), Latin American Economic Outlook 2012: Transforming the State for Development 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 Argentina Brazil Chile Colombia Mexico Peru OECD(non-LA) Market income After taxes and transfers 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 Chile Mexico OECD(non- LA) Market income + Cash transfers - Income tax + Education (in- kind) + Health (in-kind) Inequality in Latin America and the OECD (Gini indexes before and after taxes and public spending)
    11. 11. Fiscal policy in emerging and developing economies Some experiences from Latin America 11 Making fiscal reform happen in developing and emerging economies • Diagnostic and design • Implementation • Approval
    12. 12. Implementation: effectively putting in place a reform demands 12 • Technical capacity • Improving fiscal frameworks • Data • Budgeting • Rules • Institutions
    13. 13. Implementation: the lack of technical capacity is very costly 13 PPP renegotiations are the norm in emerging and developing economies, multiplying initial cost estimates Source: Bitrán, E., S. Nieto-Parra and J.S. Robledo (2013), “Opening the black box of contract renegotiations: an analysis of road concessions in Chile, Colombia and Peru.”, OECD Development Centre Working Paper 317. Road concession contracts in Latin America (% total cost)
    14. 14. Implementation: the role of fiscal frameworks 14 Fiscal policy tends to be pro-cyclical in Latin America… Output gap and variation of adjusted primary budget balance (%GDP) Source: Daude, C., A. Melguizo and A. Neut (2010), “Fiscal Policy in Latin America: Countercyclical and Sustainable at Last?”, OECD Development Centre Working Paper 291
    15. 15. Implementation: the role of fiscal frameworks 15 … and very sensitive to the political cycle Source: Nieto-Parra, S. and J. Santiso (2009), “Revisiting political budget cycles in Latin America”, OECD Development Centre Working Paper 281 Impact of elections on fiscal policy, 1990-2006 (%GDP)
    16. 16. Implementation: the role of fiscal frameworks 16 Rules seem to be working, at least during the last crisis (e.g. Chile and Peru) Source: Daude, C., A. Melguizo and A. Neut (2010), “Fiscal policy in Latin America: Countercyclical and sustainable at last?”, OECD Development Centre Working Paper 291 Adjusted primary budget balance (%GDP)
    17. 17. Implementation: the role of fiscal frameworks 17 Overall, the 2006 round of elections did not impact that much Primary balance -1 0 1 2 3 4 5 Primary expenditure -2 -1 0 1 2 3 4 5 Source: Nieto-Parra, S. and J. Santiso (2009), “Revisiting political budget cycles in Latin America”, OECD Development Centre Working Paper 281 Impact of 2006 round of elections on fiscal policy in Latin America (%GDP)
    18. 18. Fiscal policy in emerging and developing economies Some experiences from Latin America 18 Making fiscal reform happen in developing and emerging economies • Diagnostic and design • Implementation • Approval
    19. 19. Approval: citizens’ support is low 19 Latin America (and most emerging and developing regions) exhibits a low tax morale Source: Daude, C. and A. Melguizo (2010), “Taxation and more representation? On fiscal policy, social mobility and democracy in Latin America”, OECD Development Centre Working Paper 294 Do you think cheating on taxes is justifiable?
    20. 20. Approval: gaining citizens’ support, from the middle 20 A particularly relevant segment of the population is the emerging middle class… Attitudes towards democracy Source: OECD (2010), Latin American Economic Perspectives 2011. How middle-class in Latin America?
    21. 21. Approval: gaining citizens’ support, from the middle 21… but today they conform an unsatisfied majority Source: OECD (2010), Latin American Economic Perspectives 2011. How middle-class in Latin America? How middle class is Latin America? • Risk of downwards mobility • Outside the social contract (low taxed; critical and not fully benefiting from education or health care services)
    22. 22. Fiscal policy in emerging and developing economies Some experiences from Latin America 22 Making fiscal reform happen in developing and emerging economies • Diagnostic and design: •  Data and sound tax-benefit analysis • Implementation  Technical capacity and favourable fiscal frameworks • Approval  Tax morale and the social contract
    23. 23. Thank you! www.oecd.org/dev

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