LAC Forum on “Tax Incentives and Informality in a Time of Fiscal Consolidation”
With the joint sponsorship of the OECD, CIAT, ECLAC, IDB and the Ministry of Finance and Public Credit of the Republic of Colombia as host, the LAC Forum on “Tax incentives and informality in a time of fiscal consolidation” was held in the city of Bogota, on July 12 and 13, 2012.
The General Director of the Directorate of National Taxes and Customs-DIAN, Mr. Juan Ricardo Ortega inaugurated the event. Other participants were Mr. Juan Alberto Fuentes, Director of ECLAC’s Economic Development Division, Ms. Grace Perez-Navarro, Deputy Director of the OECD’s Centre for Tax Policy and Administration, Mrs. Francesca Castellani, IDB Economist and Mr. Márcio F. Verdi, CIAT Executive Secretary.
Several experiences dealing with Tax Policy and Incentives were discussed in the Forum. In the initial panel: “Current tax policy debate in Latin America and the Caribbean”, the delegates were invited to report on the main tax policy challenges in their countries, as well as to contribute their viewpoints regarding the challenges posed by the use of tax incentives and informality in relation to fiscal consolidation.
The Second Session: “Fiscal policy and investment”, helped set the bases for discussing tax incentives. Some of the issues discussed dealt with the design of fiscal policy for improving the business climate and accordingly investment, the determinant factors in investment, the importance of taxation, the types of cross-border investments and financial structures commonly used by businesses and their implications in relation to effective tax rates on inbound and outbound investment.
In the Third Session: “Experience with corporate tax incentives to stimulate investment”, an analysis was made of how corporate tax incentives may stimulate investment, the main types of incentives, their design, as well as the main tax policy considerations for improving their yield. The delegates were asked to share their experience with the use of tax incentives for investment (such as: tax holidays, free trade zones, special tax allowances and credits).
The Fourth Session of the second day: “Best practices in the use of tax incentives”, was devoted to a general overview of the best practices in the use of tax incentives from the perspective of the OECD as well as LAC countries, with respect to assessment, transparency and accountability. The participants shared their proposals-perspectives for facing these goals (through the measurement of tax expenditure, tax expenditure reports and cost-benefit analysis) in the granting and administration of tax incentives.
In the Fifth Session: “Fiscal Policy to address the Informal Economy”, the specific problem of informality, a widely extended practice throughout Latin America was analyzed both from the tax policy and administration as well as public expenditure sides.
The Sixth Session: “Tax Indicators” was devoted to the presentation of the First Edition of the Tax Statistics in Latin America Publication, which has been produced jointly by CIAT, ECLAC and the OECD (as well as an update of the current statistical work); with a discussion of its main results and findings.
Finally, in the Seventh Session: “Next Steps”, it was decided that the next meeting of the LAC Fiscal Initiative will be held in July 2013, in Montevideo, Uruguay, sponsored by the DGI of Uruguay.
Final Considerations were made by Ms. Ana Fernanda Maiguashca, Technical Deputy Minister of the Ministry of Finance and Public Credit of Colombia.
The Forum was indeed highly productive due to the current importance of the issues discussed and the quality of the speakers attending, as well as the motivation and interest of its participants.
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