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Tax Expenditures and Inequality in Latin America: News from a Collaborative Civil Society Partnership

Tax expenditures are defined as a government’s estimated revenue loss that results from giving tax concessions or preferences to a particular class of taxpayer or activity. Although they constitute a large – and often growing – burden on the public purse, they have generally been exempt from public scrutiny. They are often managed outside the regular budget process, reducing both transparency and consistent oversight. Tax expenditures represent a critical aspect of tax policy; they can impact inequality directly, by giving preference to certain groups over others, or indirectly, by reducing the revenues available for redistributive spending. Tax expenditures are especially significant in the Latin American context due to the magnitude of the revenue loss they cause and the resulting impact on public spending.

Over the past few years, IBP has collaborated with a group of Latin American civil society organizations in a research, advocacy, and learning project around tax expenditures and their impact on inequality in the region. Facilitated and coordinated by IBP, the Latin America Tax Expenditure Research, Advocacy and Learning (LATERAL) project aims to support civil society work in increasing the transparency, equity, and accountability of tax expenditure policies at the country and regional level.

The LATERAL project was motivated by the recognition that governments across the region, despite adopting language and policies promoting fiscal austerity and spending reductions, often fail to collect a significant percentage of revenues they are owed. Fiscal austerity policies currently being promoted across Latin America rarely include discussions on reforming or reducing the fiscal privileges governments distribute through tax expenditures. These policies often lack a clear assessment of their expected benefits or analysis of their impact on income distribution.

Given the opaqueness of legislation around tax expenditures, civil society has not had adequate space to engage, but the increasing amount of information being made publicly available, and the urgency of the fiscal crisis that many countries are facing, have resulted in a call for more debate and action.

In June 2018, IBP and its civil society partners in the LATERAL project will gather in Lima, Peru, to share findings of their respective in-country research along with the different approaches used to evaluate tax expenditures, even in data-poor contexts. They will reflect on their current country-based advocacy and communication efforts on tax, and the unique challenges they have faced. IBP and partners will then meet with the Latin America Tax Justice Network (Red de Justicia Fiscal de América Latina y el Caribe) before a presentation of the findings of the country-based research at the Tax Justice Network Annual Conference.

In conjuction with the workshop, IBP just released four publications generated by the LATERAL project. These resources provide an important framework to the issue of tax expenditures in the Latin American context:

Several challenges lie ahead in the pursuit of equitable tax policy, including navigating countries’ political economy constraints in order to eliminate privileges embedded in the tax systems. But the LATERAL project has already succeeded in building an energized community, where civil society members learn from and help each other improve research, advocacy, and communication around tax issues in the Latin American region.


Lateral Project Partners

Lateral Project Partners: ACIJ – Asociación Civil por la Igualdad y la Justicia (Argentina); CAD – Ciudadanos al Día (Peru); Dejusticia (Colombia); ICEFI – Instituto Centroamericano de Estudios Fiscales (Guatemala); INESC – Instituto de Estudos Socioeconômicos (Brazil); ISD – Iniciativa Social para la Democracia (El Salvador); Fundación Solidaridad (Dominican Republic); Fundar – Centro de Análisis e Investigación (Mexico); Grupo Faro (Ecuador).

For the June 2018 LATERAL Project workshop in Lima, Peru, IBP will benefit from the contribution of Friedrich Ebert Stiftung – Colombia, a nonprofit involved in projects on tax and equity in the Latin American region considering partnership with LATERAL’s civil society group members.


Further Reading

Authors

Alexandre Ciconello

Senior Program Officer, Training, Technical Assistance & Networking

Alexandre Ciconello joined IBP in February 2016 and is based in Rio de Janeiro, Brazil. As Senior Program Officer, Alexandre contributes to the Training, Technical Assistance & Networking team’s efforts to strengthen civil society organizations’ (CSOs) capacities to perform analysis of and advocacy on public budgets so they can hold governments accountable and to advance social justice. Prior to joining IBP, Alexandre was a researcher at Amnesty International and Instituto de Estudos Socioeconomicos (Institute for Social and Economic Studies, or INESC) in Brazil. In these roles, he worked closely with CSOs to implement national and international projects related to fiscal justice, public participation, and human rights in Brazil, Central America, the Netherlands, Angola, and Mozambique. From 2003-2006 he coordinated the Brasilia office of the Brazilian Association of NGOs.  Since 2001, he has also served as a consultant on public policy issues to federal ministers, sub-national governments in Brazil, CSOs, and international organization such as Oxfam. He was part of the Humphrey Fellowship Program at Washington College of Law with a focus in human rights and holds a graduate degree in law from the University of Sao Paulo and a master’s degree in political science from University of Brasilia.

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Latin America & the Caribbean