Paper

Tax Expenditures in Latin America: A Civil Society Perspective

January 2019 | by Paolo de Renzio, International Budget Partnership

Tax expenditures — provisions that reduce the amount of tax that is paid by providing special treatment to a particular class of individual, industry, or activity — have been on the rise in Latin America and represent a reduction of between 10 and 20 percent in total revenues collected by governments, with questionable impact. While most Latin American countries publish a yearly report on tax expenditures, the information is often insufficient to allow for proper assessment and debate. And because tax expenditures are usually not negotiated as part of the regular budget process, decision-making around their design and approval is mostly opaque and prone to lobbying by powerful interest groups.

The available evidence on the impact of tax expenditures shows that they tend to generate economic distortions and worsen inequality. Thus, civil society groups are increasingly becoming interested in engaging with tax expenditures to hold governments accountable for this important and opaque area of public finance. The Latin America Tax Expenditure Research, Advocacy, and Learning (LATERAL) project, a collaborative research, capacity-building, and advocacy initiative spearheaded by the International Budget Partnership and ten Latin American civil society organizations, began formally examining these issues in 2016.

This paper (available in English and Spanish) summarizes the findings of the two main components of the LATERAL project: 1.) our research examining tax policy and tax expenditures in Latin America and the role that civil society can play in related debates; and 2.) country-level research on tax policy and tax expenditures in Latin America carried out by civil society partners.

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Authors

Paolo de Renzio

Senior Research Fellow, Open Budget Initiative

Paolo de Renzio joined the International Budget Partnership in October 2010 as Senior Research Fellow and is based in Rio de Janeiro, Brazil. His research agenda covers a broad range of topics, including budget transparency and accountability, equity and justice in budgeting, taxation and tax expenditures, among others. He also supports the team producing the Open Budget Survey. Prior to joining the IBP, Paolo worked as a Research Fellow at the Overseas Development Institute; as an economist and policy advisor in Papua New Guinea’s Ministry of Finance; and as a UNDP public sector specialist, lecturer, and independent consultant in Mozambique. He has been a consultant for the World Bank, the Organization for Economic Cooperation and Development, the European Commission, and for a number of bilateral donor agencies and international NGOs. Paolo holds a PhD in International Relations from the University of Oxford, where his research focused on the impact of donor policies on budget reforms in developing countries. He also holds an MSc in Development Studies from the London School of Economics and a Bachelor’s degree in Economics from ‘Bocconi’ in Milan, Italy.

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