Tax evasion and avoidance mean for the region a significant loss of resources that are necessary to implement policies and comprehensive care systems, highlights ECLAC together with ICRICT

The Deputy Executive Secretary of ECLAC, Raúl García-Buchaca, mentioned that ECLAC estimates place tax evasion and avoidance at close to 6 points of GDP in Latin America, which means a significant loss of resources for a region that needs expand fiscal space to promote policies geared towards compliance with the Regional Gender Agenda. During his speech at the parallel event “Regional cooperation to put an end to tax evasion and avoidance and mobilize resources for care policies in Latin America and the Caribbean”, held within the framework of the XV Regional Conference on Women in Latin America and the CaribbeanGarcía-Buchaca also pointed out that international tax evasion and avoidance cannot be faced without strengthening cooperation and multilateralism to reform international financial governance through urgent agreements.

The side event was organized by the Economic Commission for Latin America and the Caribbean (ECLAC), through its Gender Affairs Division, and the Independent Commission for the Reform of International Corporate Taxation (ICRICT), with the support of Wellspring Philanthropic Fund. The inauguration was in charge of the Deputy Executive Secretary for Administration and Program Analysis of ECLAC and Manisha Mehta, Director of the Women’s Rights Program of the Wellspring Philanthropic Fund, and was moderated by Ana Güezmes García, Director of the Division of Gender Affairs of ECLAC.

After the opening remarks, the interventions of the panelists were given: Ricardo Martner, ICRICT Commissioner, Mariana Rulli, Advisor to the Secretariat for Equality and Diversity Policies of the Ministry of Women, Gender and Diversity of the Government of Argentina, José Antonio Ocampo, Minister of Finance and Public Credit of the Government of Colombia and Claudia Sanhueza, Undersecretary of Finance of the Government of Chile.

During the inauguration, García-Buchaca also mentioned some of ECLAC’s complementary recommendations on the subject. These refer to, for example, strengthening the estimate of tax evasion to provide information to decision makers and modernizing tax frameworks to incorporate the most recent good international tax practices, strengthening transfer pricing rules, anti-abuse regulations and asset controls abroad. Likewise, she pointed out that when the gender approach is absent in social spending or infrastructure policies, it is women who cushion the effects of multiple crises by intensifying care work.

For her part, the Director of the Women’s Rights Program of the Wellspring Philanthropic Fund said that there has been an increase in the concentration of wealth, which means that the challenge is not a lack of resources, but the will to adopt policies more progressive tax rates to finance the care economy.

For her part, Ana Güezmes García, referred to ECLAC’s call to go beyond the agreement reached within the OECD and the G20 to promote a global minimum in corporate taxation of 15% and to expand the universe of companies to which the agreement will apply. she also mentioned Our Common Agenda (2021) of the Secretary General of the United Nations, which, among many other initiatives, proposes a new joint structure on financial integrity to combat illicit financial flows. The membership of this structure would revolve around the United Nations, international financial institutions, the OECD, major financial centers and civil society organizations. It is hoped that it will then be a structure with multilateral participation and that a dialogue will be generated in relation to these issues.

During his speech on the panel, Ricardo Martner, Commissioner of ICRICT, pointed out that 40% of the profits of multinational companies worldwide go to tax havens. Following this, he referred to the OECD and G20 inclusive framework on base erosion and profit shifting (BEPS), which currently involves around 150 jurisdictions around the world. One of the mechanisms of this framework tries to correct the fact that many large companies do not pay taxes where sales occur but in jurisdictions with lower corporate rates. In turn, he added, this creates a “race to the bottom.” The other mechanism of this framework refers to the global minimum in corporate taxation of 15%. A step in the right direction, however, not enough to stop profit shifting and the race to the bottom. In this sense, the ICRICT Commissioner ended the first part of his intervention by referring to the important recommendations made by the High Level Panel on International Financial Accountability, Transparency and Integrity (FACTI) of the United Nations, so that developing countries and emerging economies can have greater benefits from the new international tax rules. Martner added that according to a study carried out in Chile, the evasion of capital income or high income taxes is equivalent to 4.5 points of GDP. For this reason it is interesting that they want to implement a wealth tax in the tax reform proposal in this country.

Mariana Rulli, Advisor to the Secretariat for Equality and Diversity Policies of the Ministry of Women, Gender and Diversity of the Government of Argentina, said that in order to face the problem of illicit financial flows it was necessary to bet on multilateralism and cooperation between States, and that this conference is a space for the search for crucial agreements to promote it. She also narrated the experience of the Interministerial Board of Policies and Care. This table brings together 15 organizations such as the Ministries of Health, Development and Education and the National Institute of Statistics and Censuses of the Argentine Republic. Among the most important measures that the table has taken, she mentioned: the monetary estimate of the value of unpaid domestic work as a proportion of GDP; the Comprehensive Health Care and Care Act during Pregnancy and Early Childhood, known as the 1000-day law; the program for the recognition of care tasks for women who would like to access retirement; the creation of the federal map of registered care and the program to promote the registration of domestic and care workers; the completion of the first national survey on the use of time and unpaid work; the regulation of the article of the employment contract law that is related to care spaces in companies; and the sending of the Comprehensive Care System project.

For his part, the Minister of Finance and Public Credit of the Government of Colombia, José Antonio Ocampo, indicated that in terms of tax evasion the tax reform contributes to reducing it through a series of additional measures, such as criminal regulations, and He pointed out that Colombia with the tax reform established the effective minimum tax of 15% for companies in relation to the BEPS. He also spoke of the need to develop a stronger framework for regional tax cooperation, for which he hopes that ECLAC will be one of the actors, along with others who are interested in supporting this impulse. He added that he had already started talks with some ministers in the region on this issue, such as Chile’s Finance Minister Mario Marcel. The Minister concluded by noting that the care economy is going to be one of the central issues of the new government and that he hopes to have it as one of the leading productive sectors and, in this sense, he highlighted initiatives such as that of the Bogotá Mayor’s Office, which has been one of the most innovative by installing more public care centers.

In her speech, the Undersecretary of Finance of Chile, Claudia Sanhueza, indicated that reducing evasion and avoidance –which amount to 8% of GDP in that country– are a fundamental part of the tax reform proposal presented to Parliament. The measures to reduce evasion and avoidance are aimed at reducing tax exemptions, eliminating some legal loopholes and strengthening inspectors. In relation to the international dimension, it was proposed to modify a rule on preferential tax regimes, establishing that those who do not have information exchange agreements or who, having them, impose limitations on effective exchange and who are not considered as compliant or substantially compliant according to the Global Forum on Transparency and Information Exchange. Likewise, a modification to the passive income standard was proposed, which considers, for example, family relationships between people when calculating the exempt amounts. Finally, the norm on excess indebtedness was also modified, which would establish interest paid as an expense not accepted. After referring to the collection issues of the reform project, he pointed out that when spending on social policies (which include the construction of a national care system) is proposed, this would bring benefits in terms of contributing to the reduction of gender gaps . In addition, reductions to the tax base for expenses made by people in care were proposed.

ECLAC’s Deputy Executive Secretary for Administration and Analysis of Programs closed the event by saying that the next ECLAC Tax Seminar could serve to take the first coordination steps to strengthen international cooperation on tax evasion and avoidance issues.

Event broadcast: https://www.youtube.com/watch?v=tXCEqKvtVEg