Taxation of transnational corporations in Latin America – 23/07/2021 – Latinoamérica21

The pandemic has worsened poverty, inequality and fiscal needs around the world. This is why, at the end of May, the G7 finance ministers – Canada, the United States, France, Germany, Italy, Japan and the United Kingdom – reached a first agreement to put in place a global tax on transnational corporations. , mainly transnational corporations. in technology. Subsequently, on July 10, the agreement framed within the inclusive BEPS (Base Erosion and Profit Shifting) framework of the Organization for Economic Co-operation and Development (OECD) was adapted to the G20 summit by 130 countries. , representing 90% of world GDP.

Precarious employment, unemployment, poverty and inequality have increased rapidly around the world, but especially in developing countries, as millions of businesses have gone bankrupt or closed. To cope with the health crisis, improve social conditions, buy vaccines, provide liquidity to small and medium-sized enterprises and revive the economy, governments have put in place policies that have resulted in a sharp deterioration in fiscal accounts. and an increase in public debt.


But in the face of the economic catastrophe, 32 of the world’s largest companies reported profits in 2020 exceeding the average of the past four years by more than $ 109 million, according to an Oxfam study. This has led politicians, academics and even several shareholders of these companies to demand tax reforms, national and international, in line with the new reality, so that these multinationals can contribute more.

In this context, the objective of this potential reform, according to various fiscal and monetary authorities in the G20 countries, is to improve global taxation dating from the 1920s, to fight against tax havens and to ensure that large companies are taxed fairly in the countries where they operate and not just in their country of origin. It should also reduce competition between countries to attract investment from large companies by setting lower taxes.


While this minimum tax of 15% on large companies and the digital economy looks promising in terms of tax justice, the agreement adopted by these 130 countries is the first step. First, the implementation of this tax depends, to a large extent, on tax reforms in each of the countries which may require legislative approval and, therefore, political consensus at the national and even sub-national (state and / or municipal) levels. .

In addition, for such a tax to fulfill some of its objectives, it must be geared towards a broader consensus. Of the 139 countries belonging to the inclusive BEPS framework of the OECD, 9 have not yet signed the agreement at the G20 summit, including Ireland, Hungary and Estonia. In Latin America and the Caribbean, on the other hand, countries like Bolivia, Ecuador, El Salvador, Nicaragua and Venezuela are not even part of the OECD Inclusive Framework.


Latin America and the Caribbean are the most unequal regions when comparing the distribution of their income with the rest of the world. In addition, the quality and coverage of its public services, particularly in the areas of health and education, are inferior to those of developed countries.

Despite these gaps in social services, a report on taxation in the region prepared by the OECD in 2021 showed that taxes in Latin America and the Caribbean, relative to their GDP, are on average 23.1% , while in OECD countries, they reach 33.1%. in 2019. In addition, taxes in Latin America are mainly concentrated on value added and indirect taxes, while in OECD countries – including Mexico and Chile – taxes are concentrated on personal income and companies .

Another telling fact about the complex distribution of income and tax evasion in the region is that 27% of Latin America’s private wealth is held in tax havens, more than in any other region of the world, according to the Boston Consulting Group.

Given tax needs, made worse by the pandemic, tax reform proposals made in recent years in several countries in the region, such as Chile, Colombia and Ecuador, have focused on increasing indirect taxes, such as VAT. These taxes accentuate inequalities, unlike tax regimes centered on increasing the contribution of large multinationals or personal wealth.
Academics and international organizations such as ECLAC and the International Monetary Fund are debating the need to regulate large corporations and raise taxes for the region’s wealthiest in order to improve income redistribution. However, the mere idea of ​​implementing policies that frame the use of tax havens or more progressive taxation causes unease among Latin American social and political elites.

For these reasons, despite the impact that the pandemic has had on the social level and budgetary accounts of the region, in the short and medium term, the establishment of tax systems that reduce inequalities seems to be a utopia. But if Accord 130, which includes most of the countries in the region, is implemented, it could set an important precedent and motivate Latin America and the Caribbean to carry out even deeper reforms of their tax systems to address gaps in access to public services. This could help reduce the multidimensional inequalities that characterize the region.

* Spanish translation by Dâmaris Burity

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