Issues of tax reform for Latin America

Abstract

Effective tax reform in Latin America requires addressing chronic revenue shortfalls and widespread evasion through a strategy centered on equity and economic efficiency. A system of progressive excise taxes on luxury commodities, including locally manufactured goods and automobiles, provides a flexible revenue stream that captures contributions from high-income groups who might otherwise evade personal income taxes. Furthermore, a policy of nondiscriminatory double taxation on all income from capital, applied uniformly across corporate and non-corporate sectors, corrects for market imperfections and prevents the misallocation of resources into low-productivity activities. In the specific context of real estate and agricultural property, the implementation of market-enforced self-assessment schemes—where owners declare taxable values subject to a mandatory sale provision at a premium—ensures accurate valuation and eliminates administrative arbitrariness. By equalizing tax rates across diverse capital uses and integrating imputed income from owner-occupied housing into the tax base, governments can secure substantial revenue increases without relying on regressive measures or inflationary financing. These structural adjustments create a robust fiscal framework capable of supporting long-term economic development and social improvement while maintaining horizontal and vertical equity. – AI-generated abstract.