The OECD has announced the publication of a report on tax transparency progress in Latin America.

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Tax transparency progressing well in Latin America but further improvements needed

03/05/2022 - Published today during the opening session of the sixth meeting of the Punta del Este Declaration Initiative held in San José, Costa Rica, Tax Transparency in Latin America 2022 showcases the region's recent progress in tackling tax evasion and other financial crimes through transparency and exchange of information (EOI) for tax purposes.

A recent study from the Economic Commission for Latin America and the Caribbean pointed out very high rates of personal and corporate income tax evasion in the region (44% and 58% on average respectively), and a significant share of Latin America's wealth is estimated to be held offshore, depriving its governments of billions of tax revenue. Furthermore, the average tax-to-GDP ratio for the 16 countries covered in the Tax Transparency in Latin America report remains low in international comparison, at 19.8% compared to the OECD average of 33.5% for 2020. To address these pressing issues, the report presents strategies and action-oriented recommendations underlining the role of transparency and international co-operation in helping governments fight tax evasion and other illicit financial flows.

Major achievements in recent years include:

• 14 Latin American countries are now parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the most comprehensive instrument for all forms of tax co-operation to tackle tax evasion and avoidance, thus considerably expanding their EOI relationships networks.
• 10 Latin American countries already participate in the automatic exchange of financial account information (AEOI).
• 6 out of 8 Latin American countries assessed in the second round of peer reviews of the exchange of information on request (EOIR) until 2021 were rated largely compliant, showing a positive trend in the implementation of the EOIR standard, which includes advanced beneficial ownership requirements.
• Through voluntary disclosure programmes launched prior to the first automatic exchanges, EOI and offshore investigations, at least EUR 25.7 billion additional revenue (tax, interest and penalties) have been identified in the region since 2009.
• Latin American countries reported collecting revenue amounting to EUR 3.6 billion collectively as a direct result of EOIR between 2009 and 2021.
• More than 1 650 tax officials have been trained since 2020.

"As the Punta del Este Declaration Initiative consolidates, Latin American countries are giving a clear example of commitment to fight tax evasion, corruption and financial crimes in a coherent and united manner," said Elízabeth Guerrero Barrantes, Chair of the Initiative and Vice-minister of Revenue of Costa Rica. "The monitoring and co-operation network of the Global Forum on Transparency and Exchange of Information for Tax Purposes has strengthened the exchange of experiences between tax administrations and capacity building in the region, helping us better face the challenges of international tax transparency."

Initially signed by four countries in November 2018, the Punta del Este Declaration now counts 15 signatories, including all Latin American Global Forum members, with El Salvador and Mexico the latest countries to have joined in 2021. Political buy-in and high-level engagement for the transparency agenda have significantly increased in the region, encouraging the Global Forum and its development partners (Inter-American Center of Tax Administrations, Inter-American Development Bank and World Bank Group) to design specific programmes to improve capacities within tax administrations (e.g. Train the Trainer).

Despite recent progress, Latin American countries are not yet making full use of EOI and work remains to be done. The use of EOIR is still limited in the region and uneven between countries, and AEOI has not been broadly deployed thus far. Beneficial ownership frameworks in the region are in early stages of implementation, and wider use of treaty-exchanged information to address other financial crimes remains generally challenging.

"The Global Forum will pursue its efforts and actively promote the transparency agenda in the region," said Zayda Manatta, Head of the Global Forum Secretariat. "We are looking forward to helping further develop local capacities, to achieve more transparent tax systems for the benefit of all Latin American countries and their citizens."

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La transparencia fiscal avanza a buen ritmo en América Latina, pero se necesitan más mejoras