Why we need a Latin American Tax Policy Forum
As a term to define countries in Central and South America that were colonized or otherwise influenced by Hispanic nations, “Latin America” has an interesting past. It first appeared as an adjective in 1836, in the Introduction to the book Cartas sobre la America del Norte, written by Michel Chevalier. The term was also used by local authors protesting U.S. expansion into the Southern hemisphere in 1856, but it was still viewed as a “substitute term” for “Spanish America” by Juan Carlos Cebrián and Aurelio Espinosa in 1916 and 1918.
The term “Latin America” could have disappeared with time, but it gained traction and became descriptive of our region because of the commonalities found among its countries. It describes former Central and Southern American colonies marked by anti-imperialistic and, to a large extent, democratic values. It refers to countries that inherited Spanish and Portuguese languages as well as civil law systems for the most part, each adapted to local traditions. We share the Andean mountains, the Amazon forest and river, but above all we share our people: more than 650 million Latin American students, workers, consumers, and innovators, protagonists of their own future in the international arena.
It is fair to say that Latin America as a region has been primarily a recipient of tax policy trends – for better or worse – throughout its history. Well-known European taxes, namely the Personal and the Corporate Income Taxes (PIT/CIT) and the Value-Added Tax (VAT) are featured in the legal systems of the majority of our countries. Latin American tax treaties adhere to the OECD Model Convention (and in some parts to the U.N. Model Convention), even though most local countries are currently not members of the OECD. Finally, though it could be argued that local taxes already capture revenue associated with the digital economy, one can find a direct correlation between the emergence of Digital Services Taxes (DSTs) outside of the region and the first legislative proposals to implement DSTs in Latin America.
For all of its unique cultural traits and macroeconomic attributes, Latin America has for a long time internalized the tax policy proposals emanating from foreign organizations and/or governments. To be sure, the geographical origin of these proposals has no bearing on their merits (meaning that some of the policy proposals brought into Latin American legislation, such as the anti-treaty abuse rules of the minimum standard of BEPS Action 6, are evidently conducive to a fairer tax system, whereas proposed rules under the recent Pillars One and Two might not be). What they seldom contain, however, is the meaningful contribution of Latin American tax experts concerned with Latin American taxation. This is even true for the OECD Inclusive Framework, a forum of tax administrations representing more than 140 countries worldwide – as discussed in a report released by the International Centre for Tax and Development (ICTD) in 2020, countries outside OECD membership often miss Working Party meetings, with some citing compliance costs as a reason for their low levels of participation.
This must change. Latin American tax experts should have an active voice in debates about tax policy proposals that can impact Latin America. Our comments and recommendations for the modernization of our tax systems should be heard by outside parties, not just through the positions stated by Latin American government authorities, but via a new and dedicated channel of communications. A think tank focused on Latin American tax policy – that is LATPF.
LATPF was inspired by the International Tax Policy Forum (ITPF), founded in 1992, and the European Tax Policy Forum (ETPF), founded in 2005. We do, however, pursue a mission broader than those of ITPF and ETPF. Like our predecessors, part of our mission is to produce independent academic research on tax topics that are relevant for our region. However, our aim is to also contribute to the formation of a truly regional tax policy framework with position papers and public comments from tax experts across Latin America.
Lucas de Lima Carvalho, Ph.D.
Founder of LATPF