Tax Transparency in Latin America 2022 – A Look into the Region’s Tax Avoidance Efforts

Over the last few years, the world has made heroic efforts to curtail tax avoidance and evasion—and tax transparency plays a huge role in those efforts.

However, in some regions there’s still considerable work to do—like Latin America. The OECD recently released “Tax Transparency in Latin America 2022,” a report that reveals the region’s average corporate tax evasion rate is high: 58%.

The reason? For one, there’s a large portion of wealth held offshore, which costs Latin American governments billions of dollars in tax revenue. The OECD’s average tax-to-GDP ratio is 33.5%, but Latin America’s is much lower: 19.8%.

Latin America’s Exchange of Information

Experts say that Latin America isn’t making enough use of exchange of information—the heart of tax transparency—and beneficial ownership frameworks in the region are still being implemented.

While there’s no question that more tax transparency measures are needed, there is some good news: Latin America is improving.

The multilateral Convention on Mutual Administrative Assistance in Tax Matters helps to expand exchange-of-information networks and 14 Latin American countries already partake in it—and 10 countries participate in the automatic exchange of financial account information.

Peer reviews show that six out of eight Latin American countries were rated largely compliant in terms of the exchange of information upon request.

Since 2009, the region has earned €25.7 billion in extra revenue (tax, interest, and penalties) through voluntary disclosure programs. Between 2009 and 2021, Latin American countries collected €3.6 billion collectively, and since 2020, governments have trained more than 1,650 tax officials.

Implications for Multinational Companies

Training tax officials, sharing more taxpayer information, and making sure profits earned in Latin America stay in Latin America—hmmm, what do you think that means for multinational companies with operations there?