Dr. Leonel Fernández Proposes Gradual Tax Increases for Countries in Latin America and the Caribbean with Low Rates of Taxation

Dr. Leonel Fernández Proposes Gradual Tax Increases for Countries in Latin America and the Caribbean with Low Rates of Taxation
San Salvador, September 5, 2012

Dr. Leonel Fernández, Former President of the Dominican Republic and President of Global Foundation for Democracy and Development (GFDD) and Fundación Global Democracia y Desarrollo (FUNGLODE) argues that in order to increase public investment in Latin America and the Caribbean it is necessary that countries with low taxation arrive at the current Latin American average, which is 20 percent of Gross Domestic Product (GDP).

He indicated, however, that this measure should be put in place gradually, and should be based on the concept of progressive taxation and ample social agreements that lead to fiscal pacts, as put forth by the Economic Commission for Latin America and the Caribbean (ECLAC).

He indicated, however, that this measure should be put in place gradually, and should be based on the concept of progressive taxation and ample social agreements that lead to fiscal pacts, as put forth by the Economic Commission for Latin America and the Caribbean (ECLAC).

Dr. Fernández referred to the proposal presented by Alicia Bárcena, Executive Secretary of ECLAC, during the thirty-forth session of ECLAC, celebrated August 27-31, 2012 in San Salvador, El Salvador.

“In terms of taxation, there is a differentiated situation in Latin America. In order to rely on a fiscally strong State that can realize investments and required public expenditures, with the purpose of achieving a productive transformation with greater profitability, it is necessary to arrive at a regional agreement regarding a fiscal pact,” affirmed Dr. Fernández.

The former president cited the cases of Brazil, which has a tax burden of 35 percent of GDP, and Mexico, which has a tax rate of 10 percent of GDP. The latter of which relies on petroleum profits.

Dr. Fernández specified that the cases of Brazil and Mexico are distinct from those of Guatemala and the Dominican Republic, which currently have tax burdens of 12 and 13 percent of GDP, and no other additional taxable incomes.

“How can we, with a low tax burden of 12 percent of GDP, without oil profits and without extra budgetary incomes, realize the transformation towards structural change that ECLAC proposes? It’s very difficult,” declared the former president.

Additionally, Dr. Fernández articulated that the challenge facing all of Latin America is how to effectively transform the productive structure to one that reduces productivity, technology and social inequality gaps.

He indicated that what must take place is a move towards a new design of productive structure characterized by increased diversification that results in higher production and improves the quality of life of workers.  

About the ECLAC Proposal

The ECLAC proposal puts forth the need for structural change defined by a model of production that yields greater output, with the objective of achieving greater equity in the region, presently characterized by enormous social inequality.

“We believe we are facing a historic opportunity to rethink development based on equality and greater environmental sustainability,” proclaimed Executive Secretary of ECLAC, Alicia Bárcena.

Related links:
http://www.eclac.cl/cgi-bin/getProd.asp?xml=/prensa/noticias/comunicados/4/47914/P47914.xml&xsl=/prensa/tpl-i/p6f.xsl&base=/prensa/tpl-i/top-bottom.xsl
http://www.eclac.cl/prensa/noticias/comunicados/4/47914/mensaje-secretario-general-pses34.pdf
http://www.eclac.org/