What to tax, who to tax, for what purposes?

At the last CIAT General Assembly, held a little over a month ago in Asunción, I was asked to reflect on these “deceptively” simple questions. How to respond, briefly, to questions that lead us to consider what is or what should be the “tax model“? And how to do it without falling into dogmatic recommendations of tax policy that exceed my capacities as much as the limits and objectives of a meeting centered on the tax “administration” more than on the tax “policy“?

As in so many occasions, the answer only appears when the question is understood. And in this case, in my opinion, the real question was how we can reflect on taxation. We are not looking for a closed, universal, definitive … impossible answer, but a framework in which we can consider for each country, in each moment and in each project of society what role taxation could have.

Even so, it is a complex issue, since this role is, at the same time, a reflection on the collective objectives as to the configuration of an economy and a consequence of the economic structure, with flows of causality in both directions. And from this point of view, when we speak of “an economy” it is necessary to understand it in a broad sense, with connotations that would bring us closer to the concept of society than to the simple representation of relations of production and consumption between “economic agents”. What role should organized collective action have through the State? What configuration and what level of public spending are desired and what are their consequences on private activity? What structure should adopt the tax system to finance these policies and what are their effects on the economy? How should be its spatial configuration, taking into account the different competences in this matter inside and outside the country and what limitations does this factor introduce? How is administered the system and what is its degree of acceptance by citizens? How are the different sources and uses of the income taxed?

In these links you can find the presentation and the text of the paper that develops these questions, starting from a synthetic panorama of the taxation in Latin America and the Caribbean within the global environment, its level, structure, effects, deficiencies and heterogeneity. Next, to describe these characteristics in the scheme of relations that shapes the “fiscal model” of each society: the defining and changing peculiarities of the economy; the decisions regarding the public expenditure; the internal and international interdependencies with other tax jurisdictions; The practical configuration of standards, their control and acceptance; and in greater detail, the relationships between the different manifestations of economic capacity (income from capital and labor, consumption and savings, accumulation and transfer of wealth, intermediation of companies and legal entities) and the fiscal schemes that tax them.

Finally, the most recent options are reviewed to address the challenges faced by tax systems: the latest theoretical contributions to the definition of the overall structure of the tax system (Mirrlees Report and antecedents, the “standard” model, the role of the tax rules); The configuration of international taxation (BEPS, DBCFT, Single corporate Tax Base in the EU, e-commerce and collaborative economy, tax amnesties, exit-tax); the alternatives modes of taxation by sources and uses of income (personalization of VAT, green taxation, taxes on “junk food“, taxation of “robots“, taxation of wealth, integration of income tax and assets tax); and challenges and options in matters of sub-national financing.

And in the end, the references and the links to the base documents are used to continue this debate. We started with three “simple” questions and … we ended up with many more. My apologies. In any case I hope they can be of some use, I like to believe that sometimes there is more truth in the questions than in the answers.

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