By Nick Mann | 14 November 2012

Tax revenues in Latin American countries have increased substantially over the past 20 years but remain below the average for members of the Organisation for Economic Co-operation and Development.

Revenue statistics in Latin America, published yesterday by the OECD, says the average ratio of tax revenue to gross domestic product for the region was 19.4% in 2010. This followed a steady rise in all the countries except Venezuela between 1990 and 2008, with an average increase of 5.8 percentage points in that time.

By comparison, the average rise for the 34 OECD countries in the same period was 1.5 percentage points. However, the average tax-to-GDP ratio in 2010 for the OECD bloc was 33.8%.

The report also highlights significant variations in tax-to-GDP ratios within Latin America, from Venezuela’s 11.4% to Argentina’s 33.5%. Argentina’s increase was also the most significant over the 20-year period.

The rising trend in tax revenues peaked at 19.7% in 2008. It slipped back slightly in 2009 as a result of the global economic crisis before increasing in 2010.

Making taxes more progressive, so those who have more pay more in tax, could help to address issues of inequality in Latin America, the OECD said. But it added that ‘the potential progressivity of the tax systems is reduced by the combination of high reliance on indirect taxes and the low contribution of personal income taxes to total tax revenues’.