Fiscal policy must contribute not only to navigate short-term needs and urgency, but also the transformations of development models in the longer term, including both aspects of growth and reduction of inequalities, José Manuel Salazar-Xirinachs declared today. , Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), at the close of the XXXV Regional Seminar on Fiscal Policywhich ended this Wednesday, May 17, at the organization’s headquarters in Santiago, Chile.
After three days of debates where the challenges of fiscal policy to stimulate the economic and social development of the region were analyzed, the participating authorities and experts agreed that the global and regional macroeconomic environment is complex, which makes it difficult conducting macroeconomic policy with delicate balances and decisions. They also recognized that a majority of countries have seen their debt rise to high levels, that they have reduced fiscal space, and that financing costs have risen.
“Unfortunately, these restrictions on growth and development are occurring in the context of not only a short-term economic slowdown, but also an endemic problem of mediocre growth in the region since at least 2014, which makes it difficult for us to finance so many needs. and that therefore we must see the promotion of growth as an integral part of fiscal policies, not as an external datum”, indicated the Executive Secretary of ECLAC.
“From ECLAC we have been advocating to promote a fiscal policy that contributes to boost growth and sustainable development in the region. This requires updating the fiscal pacts, based on a public finance sustainability framework focused simultaneously on strengthening revenue and a better use of resources on the spending side”, added José Manuel Salazar-Xirinachs.
The seven sessions held during the seminar covered topics such as the presentation of the proposal for a regional tax cooperation platform promoted by Colombia, Chile and Brazil, with the support of ECLAC as Technical Secretariat; delivery of the report Public debt and restrictions for development in Latin America and the Caribbeanwhere it is analyzed that the increase in debt service, especially due to the higher interests that are paid, forces the countries to allocate more and more public resources to guarantee the sustainability of the debt, which implies sacrifices in the public investment and social spending to the detriment of inclusive, sustained and sustainable growth.
Also in the session of international organizations, different options were examined that the countries of the region could consider to strengthen tax collection and the progressivity of the tax structure, as well as to improve the quality of public spending; while the importance of strengthening public revenues was made evident in the presentations of both the ECLAC document Fiscal Panorama of Latin America and the Caribbean 2023as from the report Tax statistics in Latin America and the Caribbean 2023joint publication of ECLAC, the OECD Center for Tax Policy and Administration, the OECD Development Center, the Inter-American Center of Tax Administrations (CIAT) and the Inter-American Development Bank (IDB).
“Average tax collection for the general government region recovered its pre-pandemic level in 2021, reaching 21.7% of GDP, but even so, the region is well below the OECD level of 34.1%. of GDP”, pointed out Salazar-Xirinachs.
On the last day of the Regional Fiscal Policy Seminar (Wednesday, May 17), two sessions were held that dealt with, on the one hand, income policy for sustainable development and, on the other, the importance of public spending for inclusion and growth.
The first highlighted the need to consider personal income tax reforms, including a review of legal marginal rates, tax bases, the treatment of various types of income, as well as strengthening the taxation of people with high income and high net worth. In the second, meanwhile, the importance of implementing improvements on the public spending side was analyzed from a strategic perspective to improve its effectiveness in reducing social gaps in poverty, education, health, and to boost economic growth.
Authorities from the Finance Ministries of 14 countries in the region were present at the XXXV Regional Seminar on Fiscal Policy, as well as experts from international organizations, non-governmental organizations and academia. It was attended by representatives of the IDB, CIAT, the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD). The meeting was held under the auspices of the Spanish Agency for International Development Cooperation (AECID).
