ICRICT welcomes the announcement of the first Latin American and Caribbean tax Summit in Colombia
Tuesday 17 January 2022, for immediate release
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) welcomes the announcement by Colombia's Minister of Finance, and former ICRICT Chair, José Antonio Ocampo, to convene the first-ever Ministerial Tax Summit for the Latin American and Caribbean region in Cartagena (Colombia) in July of this year,“Towards an Inclusive, Sustainable, and Equitable International Tax Order”. Without any doubt, it represents a milestone in the region to promote tax coordination, and to avoid tax competition.
It is time to rethink tax policies, especially when it comes to cross-border activities, in order to make them fair and sustainable. But without coordination, it will not be possible to put an effective end to the abuse of tax havens or to curb tax evasion and avoidance. It’s time for Latin America and the Caribbean to work together to jointly build fairer taxation initiatives, a true fiscal pact.
Tax abuse by multinationals and the richest in our societies has developed in the context of globalization and requires global solutions. But it also needs a Latin American perspective that defends the interests and characteristics of the region. For a decade, negotiations on what a new international tax system fit for the 21st century should look like, especially in a much more digitalized economy, have been led by the OECD and the G20 in a process known as “BEPS”. - In October 2021, an arduous negotiation process culminated in an agreement signed by 140 countries that can only be seen as a small first step to curbing the tax avoidance strategies of large multinationals.
With this summit, “Towards an inclusive, sustainable and equitable Global taxation”, Colombia can now make history to ensure that the countries of Latin America and the Caribbean go further together and define more effective mechanisms in the fight against tax avoidance, both by large corporations and large wealth holders. This can also ensure that the region joins forces to shape the international agenda.
This summit, the first in history, is a clear opportunity to develop a Latin-Caribbean consensus to address the current multiple crises with fairer and more sustainable tax policies and to help address the large inequality in the region.
We hope that this invitation from Colombia is well received in the region and succeeds in convening all countries so that a fairer fiscal future can be established for Latin America and the Caribbean.
Joseph Stiglitz, Professor of Economics at Columbia University and ICRICT co-chair says:
“I would like to congratulate Colombia's Minister of Finance, José Antonio Ocampo, for taking the initiative to convene the first Latin American and Caribbean tax Summit. Colombia is already showing that progressive tax reforms are possible to ensure fairer taxation of wealth and that large multinationals pay their fair share of taxes. This summit has the potential to create a positive dynamic in the region. Without progressive taxation, it is impossible to finally address the region's historical inequalities and meet the existential challenge of climate change.”
Jayati Ghosh, Professor of Economics at the University of Massachusetts at Amherst and ICRICT co-chair says:
“The agreement signed in October 2021 on the taxation of multinationals under the auspices of the OECD clearly does not respond to either the needs or the demands of developing countries. Therefore, I greatly welcome Minister José Antonio Ocampo's announcement convening the first summit on tax policies in Latin America and the Caribbean. It is excellent news for the region and the global South—a welcome sign that developing countries can stop competing with each other on taxes and organize regionally to make their voices better heard in global forums. It will also provide a much-needed platform to think of alternative tax strategies that will result in more inclusive and equitable growth.”
Magdalena Sepúlveda, Executive Director of the Global Initiative for Economic, Social and Cultural Rights and ICRICT Commissioner says:
“I would like to thank and congratulate Minister José Antonio Ocampo for the historic call to the governments of the region to convene the first summit in Latin America and the Caribbean for fair taxation. With this call, Colombia calls to address a problem that can no longer be ignored: if large corporations and the super-rich do not pay their fair share of taxes, countries will not be able to make the public investments needed to address the current major crises, nor the historic levels of inequality, along with the rising costs of living that are causing devastating the world’s population”.
Ricardo Martner, ICRICT commissioner and former head of the Fiscal Affairs Unit of the Economic Commission for Latin America and the Caribbean (ECLAC) says:
“The first tax summit for Latin America and the Caribbean is excellent news so that, at last, cooperation and coordination can strengthen the fight against tax evasion and avoidance and the fight for fairer international taxation. It is especially important for Latin America, a region that lacks space for consultation, coordination, and definition of concrete actions at the highest political level, which could consolidate positions in line with the interests of the region. As other regions of the world do have this type of institutional frameworks, such as Europe or Africa, Latin American countries have been at a disadvantage when it comes to discussing the urgent and necessary changes required in international taxation. I, therefore, welcome Minister José Antonio Ocampo's initiative, which comes at a very opportune political moment to increase cooperation in the region”.
Martín Guzmán, former minister of finance of Argentina and ICRICT Commissioner says:
“Minister José Antonio Ocampo's call for the first fiscal summit in Latin America and the Caribbean is a great opportunity, at a historic political moment, to strengthen the progressive tax measures needed to respond to the multiple crises the world is facing. We continue to have a dysfunctional global tax system that allows large multinational corporations and the wealthiest to legally avoid paying taxes, defunding States, and generating a more unequal and unstable world. We need to join forces. Only through collective action can we change the balance of power and effectively negotiate reforms that have a satisfactory outcome for all, and especially for developing countries”.
Notes to Editors (background):
Latin America and the Caribbean (LAC) continue to be the world’s most unequal region. In 2019, the richest 20% of the population held almost half of the total income, while the poorest 20% held less than 5% of the total income. The richest 1% in the region holds almost one quarter of the total income.
The richest 1% in Brazil concentrates almost half of the country's wealth, compared to just 20.3% in the hands of the poorest 90%. The richest man in Mexico has a fortune greater than that of the poorest half of the population, in a country with a population of more than 130 million inhabitants.
Since the beginning of the pandemic -between March 2020 and November 2022-, the wealth of the region's billionaires increased by 21%, a growth five times faster than the region's GDP during the same period (+3.9%). Today, 100 billionaires in LAC concentrate more wealth than 392 million people, who represent 60% of the population of this region.
In collaboration with the Institute for Policy Studies, Patriotic Millionaires and Fight Inequality Alliance, Oxfam has calculated that around $50 billion could be raised by levying a net wealth tax of 2% on millionaires, 3% on those with wealth in excess of $50 million, and 5% on billionaires across Latin America and the Caribbean. Such an amount would be enough to increase public investment in health throughout the region by 36%.
In 2020, the average tax-to-GDP ratio in the region was 21.9%, varying widely across the region, ranging from 12.4% in Guatemala to 37.5% in Cuba. With the exceptions of Barbados and Cuba, all LAC countries recorded a tax-to-GDP ratio below the OECD average of 33.5%.
Since the early 1980s, the average marginal tax rate on the highest incomes has fallen from 51% to 27% by 2015, according to the OECD. For example, in Brazil, it is set at 27.5% for total incomes above 55,976 Brazilian reais ($10,825) annually.226 This translates into a very low tax rate on the super-wealthy, in a country with high levels of economic inequality and more billionaires than any other Latin American nation.
Download here ICRICT’s latest declaration, “An emergency tax plan to confront the inflation crisis”.