Features of fiscal pressure in Latin America and the Caribbean
There have been several attempts at defining and standardising how we account for a government’s fiscal revenues. Under all these frameworks, international comparisons have consistently emphasised the low levels of tax revenues in Latin America, and to a lesser extent the Caribbean, relative to more developed countries. As is often the case, however, the reality is more complex. For example, it is widely known that LAC countries derive significant revenues from permitting the exploitation of natural resources. Moreover, private and public arrangements to finance social security co-exist in Latin America to a much greater extent than in OECD countries, a circumstance that is not completely addressed in international definitions and comparisons.
In this regard, it may be useful to take into account those two additional sources of revenue or “revenue equivalent” besides the tax revenues traditionally considered. In this special feature the sum of these sources into the theoretical construct known as the Equivalent Fiscal Pressure (EFP) is incorporated.
This fiscal-revenue indicator may offer a more comprehensive picture for LAC countries, both from the perspective of the revenues available to the state and from the viewpoint of the effort demanded of citizens.