NCPA - National Center for Policy Analysis

Latin American Taxes

September 16, 1991

Tax reform has aided economic growth and reduced inflation — and increased tax revenues — in a number of Latin American countries.

  • Mexico cut its top tax from more than 60 percent to 35 percent in 1989-90, and tax revenues rose from 16 percent of Gross Domestic Product (GDP) to 18.6 percent.
  • Jamaica cut its top tax from 58 percent to 33 percent in 1986, and tax revenues have risen from 28.1 percent of GDP to 33.4 percent.
  • Colombia cut its top tax from 60 percent to 30 percent, mostly in 1984, and tax revenues have risen from 7.8 percent of GDP to 10.6 percent.
  • Chile cut both corporate and individual tax rates in 1984, and tax revenues have risen from 7.8 percent of GDP to 10.6 percent.
  • After Bolivia cut its top tax from 45 percent to 10 percent in 1986 and let taxpayers deduct the value-added tax, tax revenues rose from 1.9 percent of GDP to 7 percent.

Latin American countries that have not yet adopted competitive tax policies are getting less and less revenue.

Unfortunately, the International Monetary Fund is pushing Peru, Argentina and possibly other Latin American countries to raise taxes even higher, assuming this will increase government revenues.

 

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