Strengthening fiscal sustainability in Latin America
Title: Strengthening of fiscal sustainability through CIAT
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Lead executing agency: Inter-American Center of Tax Administrations (CIAT)
Overall term: 2013 to 2016
Advancing globalisation and the steady increase in cross-border economic activities by national and multinational enterprises are making the work of national tax administrations, especially those in developing countries, more complex. This is reflected in the growing demand among member countries of the Inter-American Center of Tax Administrations (CIAT) for ways to combat tax evasion and tax avoidance more effectively.
As a regional association CIAT is in future to perform a number of tasks to strengthen tax administrations in Latin America and the Caribbean (LAC) and thus contribute to fiscal sustainability in the region. These tasks include:
- establishing a forum where members can share their experience and views on successful examples of tax administration reform carried out at regional and international level
- facilitating regional cooperation between tax administrations
- providing access to high-quality products, for example studies on revenue-related topics and tax statistics, services such as training measures as well as technical consultancy in the member countries.
CIAT, represented by its Executive Secretariat, also offers and delivers additional comprehensive services for its member countries.
The CIAT Executive Secretariat provides member countries with services and products in a manner which is more results-oriented and geared to their needs. It thus makes an effective contribution to the mobilisation of domestic revenue in member countries.
The CIAT Executive Secretariat is not yet able to meet demand from its member countries in a manner that is results-oriented and geared to their needs. The improvement in financial capacity in LAC provides the necessary conditions for sustainable poverty reduction. The project advises the CIAT Executive Secretariat on ways to harness its potential more effectively. It helps to strengthen regional tax administrations by promoting international exchange and providing services. The project complies with the key international agreements and initiatives in this field, such as the Paris Declaration (2005), the Monterrey Consensus (2002), the Doha Declaration (2008) and the Busan High Level Forum on Aid Effectiveness (2011). The European Union is also vigorously promoting the issue of taxes and development.
Through its development cooperation activities, Germany is helping to strengthen revenue systems in partner countries, in particular through the fight against tax evasion and tax avoidance, within the framework of the International Trade Centre (ITC) of UNCTAD/WTO. The regional strategy of the German Federal Ministry for Economic Cooperation and Development (BMZ) explicitly emphasises the role played by good governance, and above all good financial governance, in the implementation of the German Government’s strategy on Latin America.
GIZ supports the CIAT Executive Secretariat in carrying out its duties by providing experts as well as financial contributions and local subsidies on a small scale to be used for studies, seminars, workshops, study trips and training courses.
An efficient, transparent and citizen-centred financial administration generally has a positive impact on the situation of poorer sections of the population. However, knowing how tax revenue is spent is crucial to being able to draw any conclusion as regards its impact on reducing poverty.
In the past, the way in which countries have made use of their own sources of public revenue has been largely unsatisfactory. Good financial governance is an effective solution to this problem. The project has contributed towards propagating this view increasingly in many LAC countries.
The project has strengthened CIAT and is turning its attention towards the goal of fiscal sustainability in LAC. This objective is extremely ambitious and can only be achieved over the long term. The registration of Belize as a new member of CIAT marks a milestone on this path. This decision was taken following the country’s participation in a regional exchange of experiences, organised and conducted by GIZ.
The many years of cooperation between the project and CIAT has produced consistent and positive results. The regional organisation gives its full and staunch backing to the project approach. With the focus on administration as opposed to policy issues, CIAT’s work is characterised by stability and continuity and is unaffected by political changes.