In a recent conversation, someone mentioned a popular saying that says “A crocodile that falls asleep ends up as a wallet”. This expression is used when an opportunity is lost due to hesitation or slowness and it made me think about the numerous opportunities that tax administrations (TAs) miss because they do not have resources according to their challenges, do not make decisions in a timely manner and/or do not have an adequate regulatory framework. In this post, I am going to focus on the first of the aspects, the resources.

The ability of countries to collect tax resources efficiently, effectively, and sustainably is key to the success or failure of a governmental management.

In Latin America (AL), the aggregate situation is critical. In 2025, public debt averaged 59% of regional GDP (ECLAC, 2025), energy prices and other basic goods usually produced by developing countries have been volatile in recent years, making it difficult to forecast income; some economic sectors have not yet fully recovered from previous crises (e.g., financial crises and COVID), business transformation projects an increase in inequality, which was already high in 2025 (according to ECLAC’s Social Panorama 2025 report, the richest 10% of the population of LAC captured 34.2% of the total wealth and the poorest 10% only reached 1.7%). These are just some of the many challenges facing LAC, and which vary in intensity by country.

In this context, in addition to the current cost of running the State, the challenges facing the countries of Latin America are to face the emerging costs of combating drug trafficking (an initiative called the “Shield of the Americas”) and crime, to pay their debts, including those originated as a result of the COVID health crisis, face natural disasters, and to try to reduce the effect of inequality, among others.

These challenges are compounded by the need to narrow the tax gap in the region, which stood at around 6.7% of regional GDP in 2023 (ECLAC, 2024), and the tax claims currently in litigation, which in some countries amount to double-digit percentages of their GDP.

The CIAT, the IDB, the IMF, the World Bank, the OECD, and others offer numerous diagnostic tools and documents with recommendations, good practices, and challenges for TAs, which are extremely useful (e.g., preventive approaches, process automation, access to information, audit techniques, new technologies, etc.). However, a good part of these valuable documents and tools become aspirational when there are not enough resources. Usually, significant improvements require significant resources. Here, I am not referring only to financial resources, I also consider human resources, whose learning curve, in complex subjects, can be slow.

Due to their characteristics, TAs are naturally intensive in the use of resources (e.g., technical personnel specialized in multiple disciplines, sophisticated technologies to receive and process countless data and information, buildings, etc.), but they are also income generators, exponentially multiplying the resources they consume. It is worth noting, for example, that as part of a cooperation program between CIAT and SECO (Swiss Cooperation), which began in 2020 and concluded in 2025, supporting seven TAs in Latin America and the Caribbean, returns were achieved that in some cases exceeded seven times the amount invested and, although it may be hard to believe, in other cases, they reached more than 16,000 times the investment. These projects focused mainly on risk management, which is currently one of the biggest pending subjects of the TAs, as it involves an integral reengineering of processes, a cultural change, and a strong technological support. The OECD Global Forum offers another example on Transparency and Information Exchange, which reported a collection for AL, originating from CRS, of EUR 585 million by 2024 (OECD, 2025). In the same way, the Electronic Invoice Anomaly Detector (e-IAD), and the system for the VAT collection originated in cross-border transactions involving digital goods and services (DEC), are generating considerable additional tax resources, if we consider the level of investment that its implementation represents.

Despite this, it often happens that in times of crisis, some governments consider TAs as mere cost centers, cutting resources for investment and even personnel, affecting their short-term operational capacity, development, and adaptation to changes in the context in the long term. These cycles of human and material decapitalization generate a loss of resources difficult to quantify, but significant; and eventually, irreversible damage in the medium or long term. Even budget reductions can be aggravated when tax reforms are formulated in difficult moments that require a greater administrative effort.

In this sense, it is essential that governments review and question the financing mechanisms of their TAs and, if possible, define special treatments according to their relevance, considering, in addition, that in times of crisis a greater investment in the TAs can be countercyclical.

The purpose of this post is to invite you to reflect on an issue that, at first glance, seems obvious—one that is also reflected in the Sustainable Development Goals (2030 Agenda) and the Seville Commitment (4th International Conference on Financing for Development)—but that is not always reflected in reality.

Equipping a tax administration with the necessary resources requires a sustained, long-term effort, because institutional maturity cannot be bought; it is built through sustained investment, human capital, and technological capabilities, all of which take years to establish. If we let a tax administration fall asleep, we run the risk of ending up like the crocodile.

Bibliographic references

ECLAC, 2025. Fiscal Panorama of Latin America and the Caribbean, 2025: boosting investment for growth and sustainable development.

ECLAC, 2024. Fiscal Panorama of Latin America and the Caribbean, 2024.

OECD (2025). Tax Transparency in Latin America 2025: Latin America Initiative Progress Report

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