Tax Structure in Latin American: Its Impact on the Real Economy

Abstract

In this paper we review the structure of tax systems in Latin America and analyze their impact on the real economy - economic growth, macro-economic stability, and income redistribution. We find that in Latin America relatively higher reliance on direct taxes slows economic growth, although this effect is smaller than in the ‘Rest of the World.’ However, unlike in most other countries, higher reliance on direct taxes in Latin America does not appear to play a sig-nificant role in dampening economic volatility or in reducing income inequality in the region.