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Tax reform for human development in Central America

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  • Agosin, Manuel R.
  • Barreix, Alberto
  • Machado, Roberto
  • Gómez Sabaini, Juan Carlos

Abstract

Tax revenue in Central American countries accounts for just 13.5% of their gross domestic product; and the resultant resource shortage means insufficient and low-quality public expenditure, and chronic fiscal deficits financed through borrowing. In 2003 interest payments absorbed an average of 18% of the subregion's total tax revenue. In these open economies, whose enterprises need to become more internationally competitive, fiscal policy is crucial both for financing the necessary physical and social infrastructure and for combating the poverty that still afflicts roughly 40% of the population. The economic development of Central America therefore needs second-generation reforms to modernize its tax systems, in order to increase revenue by about four percentage points of GDP.

Suggested Citation

  • Agosin, Manuel R. & Barreix, Alberto & Machado, Roberto & Gómez Sabaini, Juan Carlos, 2005. "Tax reform for human development in Central America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    • Handle: RePEc:ecr:col070:11115
    Note: Includes bibliography
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    2. Engel, Eduardo M. R. A. & Galetovic, Alexander & Raddatz, Claudio E., 1999. "Taxes and income distribution in Chile: some unpleasant redistributive arithmetic," Journal of Development Economics, Elsevier, vol. 59(1), pages 155-192, June.
    3. Sebastian Edwards, 2003. "Debt relief and fiscal sustainability," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 38-65, March.
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    5. Manuel R. Agosin & Alberto Daniel Barreix & Roberto Machado & Juan C. Gómez Sabaini & Jorge Cornick & Carlos Acevedo & Mauricio González Orellana & Osvaldo H. Schenone & Carlos de la Torre, 2005. "Recaudar para crecer: Bases para la reforma tributaria en Centroamérica," IDB Publications (Books), Inter-American Development Bank, number 20678 edited by Manuel R. Agosin & Alberto Daniel Barreix & Roberto Machado, February.
    6. World Bank, 2004. "World Development Indicators 2004," World Bank Publications - Books, The World Bank Group, number 13890, December.
    7. Ms. Janet Gale Stotsky & Ms. Asegedech WoldeMariam, 2002. "Central American Tax Reform: Trends and Possibilities," IMF Working Papers 2002/227, International Monetary Fund.
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