Updating of Equivalent Fiscal Pressure in Latin America and the Caribbean

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Oct 2017
The tax database for the Latin American and Caribbean (LAC) region, prepared by the IDB and CIAT, shows significant innovations in relation to the already existing databases: (i) it introduces the concept of Equivalent Fiscal Pressure (EFP), which complements the traditional tax revenues, plus all the mandatory social security contributions systems (public and actuarial private) and freely available government revenues from natural resources; and (ii) it provides expanded information on the fiscal situation of the different levels of government and different taxes. This document includes a brief analysis of the evolution of the EFP, as well as specific characteristics of its revenue structure. Additionally, as an example of anexercise allowed by the data, we calculate the short- and long-term buoyancy of the EFP for all LAC countries as well as for subgroups of countries. The results show that the long-term buoyancy of the EFP is approximately 1.34, thereby suggesting a tax effort for the long term on the side of revenues. On the other hand, the short-term buoyancy is around 0.86, probably due to low taxation of individual income and the large proportion of taxation on consumption.