How do the Tax Burden and the Fiscal Space in Latin America look like? Evidence through Laffer Curves

Ignacio Lozano-Espitia and Fernando Arias-Rodríguez
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Fernando Arias-Rodríguez: Banco de la República de Colombia
Authors registered in the RePEc Author Service: Fernando Arias-Rodríguez

Borradores de Economia from Banco de la Republica de Colombia

Abstract: How much fiscal space do Latin American countries have to increase their tax burdens in the long term? This paper provides an answer through Laffer curves estimates for taxes on labor, capital, and consumption for the six largest emerging economies of the region: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. Estimates are made using a neoclassical growth model with second-generation human capital and employing data from the national accounts system for the period from 1994 to 2017. Our findings allow us to compare the recent effective tax rates on factor returns against those which would maximize the government's revenues, and therefore to derive the potential tax-related fiscal space. Results suggest that joint fiscal space on labor and capital taxes would reach 6.5% of GDP for the region, on average, and that there are important differences among the countries. **** RESUMEN: ¿Cuánto espacio fiscal tienen los países de América Latina para incrementar su carga tributaria en el largo plazo? Este documento ofrece una respuesta mediante la estimación de las Curvas de Laffer para los impuestos al trabajo, al capital y al consumo de las economías más grandes de la región: Argentina, Brasil, Chile, Colombia, México y Perú. Los cálculos se realizan empleando un modelo de crecimiento con capital humano de 2da generación, que es calibrado para cada país con información de las cuentas nacionales para el período 1994 a 2017. Los resultados nos permiten comparar las tarifas efectivas recientes con aquellas que maximizarían los recaudos del gobierno, para así derivar el espacio fiscal de largo plazo. Nuestros hallazgos sugieren que el espacio fiscal conjunto sobre los impuestos al trabajo y al capital alcanzaría el 6.5% del PIB de la región, en promedio, y que existen diferencias importantes entre los países.

Keywords: Laffer curves; fiscal policy; taxes on consumption, taxes on labor and capital incomes.Curvas de Laffer, política fiscal, impuestos sobre el consumo, las rentas laborales y los rendimientos del capital. (search for similar items in EconPapers)
JEL-codes: E13 E62 H20 H30 H60 (search for similar items in EconPapers)
Pages: 33
Date: 2020-05
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1117

DOI: 10.32468/be.1117

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