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Fiscal Panorama of Latin America and the Caribbean 2020 Fiscal Panorama of Latin America and the Caribbean 2020 Fiscal policy amid the crisis arising from the coronavirus disease (COVID-19) pandemic Thank you for your interest in this ECLAC publication ECLAC Publications Please register if you would like to receive information on our editorial products and activities. When you register, you may specify your particular areas of interest and you will gain access to our products in other formats. www.cepal.org/en/publications ublicaciones www.cepal.org/apps Fiscal Panorama of Latin America and the Caribbean 2020 Fiscal policy amid the crisis arising from the coronavirus disease (COVID-19) pandemic Alicia Bárcena Executive Secretary Mario Cimoli Deputy Executive Secretary Raúl García-Buchaca Deputy Executive Secretary for Management and Programme Analysis Daniel Titelman Chief, Economic Development Division Ricardo Pérez Chief, Publications and Web Services Division The Fiscal Panorama of Latin America and the Caribbean is a report prepared each year by the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC). The preparation of this year’s report was supervised by Daniel Titelman, Chief of the Division, and Noel Pérez Benítez, Chief of the Division’s Fiscal Affairs Unit. Jean Baptiste Carpentier, María Gil, Michael Hanni, Juan Pablo Jiménez and Noel Pérez Benítez worked on the drafting of the report. Chapter III drew on inputs prepared by Juan Carlos Gómez Sabaini and Dalmiro Morán. Andrea Podestá prepared inputs for chapter IV. Swen Tellier provided research assistance and prepared statistical information. The Spanish Agency for International Development Cooperation (AECID) assisted with the financing of this publication. United Nations publication ISBN: 978-92-1-122041-4 (print) ISBN: 978-92-1-004740-1 (pdf) ISBN: 978-92-1-358274-9 (ePub) Sales No.: E.20.II.G.9 LC/PUB.2020/6-P Distribution: G Explanatory notes: Copyright © United Nations, 2020 - Three dots (...) indicate that data are not available or are not separately reported. All rights reserved - A dash (-) indicates that the amount is nil or negligible. - A full stop (.) is used to indicate decimals. Printed at United Nations, Santiago - The word “dollars” refers to United States dollars, unless otherwise specified. S.20-00153 - A slash (/) between years (e.g. 2013/2014) indicates a 12-month period falling between the two years. - Individual figures and percentages in tables may not always add up to the corresponding total because of rounding. This publication should be cited as: Economic Commission for Latin America and the Caribbean (ECLAC), Fiscal Panorama of Latin America and the Caribbean 2020 (LC/PUB.2020/6-P), Santiago, 2020. Applications for authorization to reproduce this work in whole or in part should be sent to the Economic Commission for Latin America and the Caribbean (ECLAC), Publications and Web Services Division, [email protected]. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and to inform ECLAC of such reproduction. CONTENTS Fiscal Panorama of Latin America and the Caribbean • 2020 Contents 3 Foreword ...........................................................................................................................................................................................7 Chapter I Fiscal policy and the challenges posed by the coronavirus disease (COVID-19) pandemic ................................... 9 Introduction ................................................................................................................................................................................. 11 A. The starting point: a weak fiscal position preceding the crisis ...................................................................................... 13 B. Fiscal policy responses to address the crisis arising from the coronavirus disease (COVID-19) pandemic .................. 23 1. Government-backed public spending and liquidity support policies ................................................................. 26 2. Additional tax relief measures .......................................................................................................................... 32 C. The complex financing situation for 2020 ........................................................................................................................ 40 D. Conclusion: fiscal policy in the short and medium terms ................................................................................................ 43 Bibliography ................................................................................................................................................................................ 45 Chapter II Evolution of public finances in Latin America and the Caribbean in 2019 ................................................................ 47 A. The deterioration in macroeconomic conditions took its toll on public finances in the region ..................................... 49 B. The collection of exceptional revenues helped to stabilize total income in Latin America ........................................... 50 C. Public spending was relatively stable in Latin America and the Caribbean in 2019 ..................................................... 56 D. Larger fiscal deficits in Latin America signalled a reversal of the trend towards narrowing deficits seen in the past two years ............................................................................................................................................... 60 E. Debt has kept increasing in Latin America, but has continued to fall in the Caribbean ................................................ 62 F. The policy space for subnational public finances has narrowed in recent years as fiscal deficits remain high and public debt increases ............................................................................................................................ 72 Bibliography ................................................................................................................................................................................ 77 Chapter III Tax evasion levels and the key measures to tackle it in the countries of Latin America and the Caribbean .......... 79 Introduction ................................................................................................................................................................................. 81 A. Measuring tax evasion: identifying good practices for the countries of the region ...................................................... 82 B. Levels of tax evasion in the region: general and specific features ................................................................................. 88 1. VAT evasion and its trends in recent years ....................................................................................................... 88 2. Income tax: unacceptable non-compliance levels in a very unequal region ..................................................... 92 3. International tax evasion and avoidance and the difficulties in determining their magnitude globally .......... 96 C. Actions countries are taking to address this challenge .................................................................................................. 98 1. Measures to promote compliance at the national level ................................................................................... 99 2. Tax responses to the growth of the digital economy ...................................................................................... 102 3. The strategies adopted by countries in the new global tax context ............................................................... 105 D. A road map to tackle tax evasion and foster national resource mobilization in the region ........................................ 111 1. Measuring evasion is a starting point to improve tax management .............................................................. 112 2. Measures to address tax evasion at the national level .................................................................................. 113 3. The challenges posed by the digitization of the economy for tax systems .................................................... 113 4. An international approach to expanding tax controls beyond geographical borders ..................................... 114 5. The coherence of the tax system and coordination of actions within the framework of the 2030 Agenda for Sustainable Development ................................................................................................................................. 115 Bibliography .............................................................................................................................................................................. 116 Annex III.A1............................................................................................................................................................................... 118 4 Contents Economic Commission for Latin America and the Caribbean (ECLAC) Chapter IV Public spending as a driving force for inclusive economic development and the achievement of the Sustainable Development Goals ......................................................................................................................................... 121 Introduction .............................................................................................................................................................................
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