Taxation

The primary objective of this post is to highlight the importance and gravity of the existing tax evasion in Latin America and the Caribbean today. A study conducted by Santiago Diaz de Sarralde Miguez reports that Latin America and the Caribbean are characterized by a relatively low tax burden, which averages 22.8% of GDP. That is 11.5% less than the OECD (2015). While it is true that there are large differences between countries, as the tax burden varies from 12.4% in Guatemala to 38.6% in Cuba.

Technological progress and trade liberalization dramatically increased electronic trade and opened new chapter for the businesses to remotely supply services and intangibles to the customers anywhere around the world. Such rise of e-trade and emergence of global economy created new challenges for the policy makers in applying goods and services tax (GST) on cross-border business to consumer (“B2C”) transactions.

While the desire to tax digital platforms is legitimate, the strategy taken by the country may be too costly. It is likely that this law may face future amendments to include factors such as thresholds so that the tax administration aspect is cost effective. For example, the law provides that this amount shall be due at the time the amount is paid to the service provider for the service, it is unclear how this is supposed to be remitted. If you compare this to rental income tax which is due by the 20th of each month, one is able to consolidate the income and make the necessary payments without incurring any unnecessary transaction charges from the intermediary financial institutions.

In the modern world, new questions arise since due to the new technologies, the criteria described before may not be enough to determine if certain operations should be taxed or not in certain jurisdictions. In the following lines we will presenting the situation of digital economy taxation in Peru and where possible, offer solutions where necessary.

The Post-COVID19 path to economic recovery in Latin America and the Caribbean will demand both Domestic Revenue Mobilization measures and the promotion of domestic and foreign investment. Amid all the controversy surrounding the concession of tax incentives, the COVID-19 pandemic taught us a lesson: nothing is a sole economic issue. Public policies should address other concerns such as employment, health, environment, and education. A well-designed package of governmental measures may be a balanced proposal that includes diverse public interests to achieve optimal delivery of public goods. This post will focus on the granting of tax incentives for the digital economy in  accordance with the GATT, the GATS, and the OECD’s recommendations on harmful tax competition.

Brazil has been a challenging environment for businesses, in great part, due to the complexity and inefficiency of its tax system. Despite some controversy about the necessity of a wide and structural tax reform, the topic has been treated as a priority by the President and Congressional leaders, but the bills that currently address the tax reform have struggled to make significant progress in the Brazilian Congress. Besides, uncertainties remain as the Federal Administration may present and endorse a proposal, which could include the creation of a Digital Services Tax (“DST”).

With regards to the granting of taxing rights, in line with the destination principle Chilean VAT generally levies services provided or utilized in Chile. The destination principle is designed to ensure that tax on cross-border supplies is ultimately levied only in the jurisdiction where the final consumption occurs, thereby maintaining neutrality within the VAT system as it applies to international trade.

The taxpayer is the user or consumer of the digital service. However, if an Argentine resident intermediary mediates in the payment, it must act as withholding agent. If more than one intermediary are involved, the one with the closest business relationship with the digital service provider must act as the withholding agent. If no Argentine payment intermediary is involved, then the recipient of the services must report and pay the VAT through an electronic bank transfer to the Argentine Tax Administration.

As long as national tax systems develop in response to unique social and administrative pressures, jurisdictions will continue to rely on tax systems that exhibit at least as many differences as similarities. Tax harmonization represents the traditional answer to that entropic pressure, reflecting a confidence that nations can avoid international tax conflicts by becoming more like one another. Unfortunately, in part because many of the jurisdictions that populate today's international tax landscape have little in common, it seems that harmonization is no longer equal to the task. This Part introduces the concept of deharmonization, an alternative to harmonization that may be more robust.

The main finding of this contribution is that most universities offer enough courses on international aspects of law but do not ensure all their students get the minimum necessary, i.e., a sound introduction to the principles of public and private international law as well as ideally the skills to compare legal solutions in various jurisdictions (comparative law).