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Tax Expenditure and Evasion in the Value Added Tax in Latin America

Author

Listed:
  • ALEJANDRO RASTELETTI

    (Inter-American Development Bank)

  • ESTEFANÍA SARAVIA

    (UCLA (University of California))

Abstract

This work estimates tax expenditure and evasion in the value added tax (VAT) in 16 countries in Latin America using a common methodology of tax gap analysis. The results obtained indicate that revenue losses in VAT due to tax expenditures and evasion are high and highly heterogeneous across countries. Tax expenditures were 2.1% of GDP on average in 2019, while evasion reached an average of 2.3% of GDP. Tax expenditures tend to be higher in countries with higher standard VAT rates and in poor countries. VAT evasion tends to be higher when the tax burden on the private sector is greater.

Suggested Citation

  • Alejandro Rasteletti & Estefanía Saravia, 2024. "Tax Expenditure and Evasion in the Value Added Tax in Latin America," Hacienda Pública Española / Review of Public Economics, IEF, vol. 251(4), pages 27-49, December.
    • Handle: RePEc:hpe:journl:y:2024:v:251:i:4:p:27-49
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    References listed on IDEAS

    as
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    4. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, January.
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    7. Mr. Eric Hutton, 2017. "The Revenue Administration–Gap Analysis Program: Model and Methodology for Value-Added Tax Gap Estimation," IMF Technical Notes and Manuals 2017/004, International Monetary Fund.
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    More about this item

    Keywords

    Value-added tax; Tax expenditure; Evasion; Latin America.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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