Cartagena will host the first Tax Summit of Latin America and the Caribbean: this is the scenario

In the framework of the Davos Economic Forum, held in January, José Antonio Ocampo presented the initiative “Towards an inclusive, sustainable and equitable global taxation”, which is expected to advance tax cooperation and fair taxation.
The initiative, which includes holding the first Latin American and Caribbean Tax Summit, appears to be a futile effort to influence the United Nations and to coordinate Latin American countries that have different perspectives on multiple issues.
The initiative “Towards inclusive, sustainable and equitable global taxation” aims to bring large multinationals and the ultra-rich under control in tax matters. However, the proposal faces significant challenges in regulatory, administrative, coordination and cooperation aspects.
Tax summit seeks to go beyond 2021 OECD agreements
The tax summit, to be held in Cartagena on July 27-28, has been overshadowed by other events. This is the case of the summit of heads of government in Brasilia in early June, the European Union – CELAC summit on July 17 and 18, and the summit for a Global Financial Pact held on June 22 and 23 in Paris among 40 countries, which convened another one for early September in Cartagena.
One of the most important issues of the tax summit will be to ensure that multinationals are taxed fairly, for which the OECD framework defined in 2021 to modernize the international tax system and adapt it to the digital economy will be analyzed.
The OECD agreements are very limited, as they establish that multinationals pay a 15% tax, far below what they are obliged to pay in most countries.
With the tax summit initiative, the aim is to take the OECD agreements further, to apply a tax on a portion of the profits of those companies with a turnover of more than 20 billion euros, with the exception of the extractive and financial sector.
The OECD guidelines
The agreements signed in 2021 are slow to implement and are full of exceptions and dilatory procedures. Moreover, they are not easy to implement by countries that do not have a strong tax administration and a capacity to control the turnover of multinational companies in their territories.
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So fragile, complex and unambitious is this Two Pillar approach that dozens of organizations and countries have described it as insufficient, partial and only benefiting a few developed countries and affecting a limited group of companies.
The continent’s multiple taxation problems
The initiative has had a complex evolution. Initially, there was talk of a presidential summit, but this was later reduced to a ministerial summit and the level of ambition of the conveners changed. Currently, rather than defining a common platform to take to the United Nations, what is being sought is to create some kind of fiscal coordination to develop a position to take to the United Nations.
On the other hand, very few Latin American governments are giving priority to this issue. Although formally Brazil and Chile are co-sponsoring the meeting, in practice the presidents of these two countries do not refer to the issue and other matters occupy their attention.
Issues such as climate change, illicit drug trafficking, trade relations with developed countries, war and migration, among others, occupy more the attention of the leaders, including President Petro, who has not played a leading role in the issue.
According to many analysts, the dependence of many governments on the recommendations of the International Monetary Fund (IMF) and the World Bank limits the room for maneuver in many countries. Moreover, competition among them to attract foreign investment and provide new incentives to investors becomes an additional difficulty.
Tax havens
According to estimates by Oxfam and the Global Alliance for Tax Justice, tax havens, characterized by low taxation and the prevalence of banking secrecy, are home to nearly $12 trillion that may represent 10% of the world’s Gross Domestic Product (GDP), according to the Independent Commission on International Tax Reform (ICRIT), and every year USD $427 billion in taxes are lost globally due to global tax abuse.
The recurring scandals, resulting from the leakage of documents relating to the movement of capital to these jurisdictions (Panama Papers, Pandora, etc.) to hide wealth, evade taxes, conceal corruption and money laundering, highlight the lack of action by the authorities and the inefficiency of the mechanisms for the exchange of information.
Although the first Latin American and Caribbean Tax Summit is part of this process that seeks a tax convention within the framework of the United Nations, the difficulties are enormous and it is difficult to reach agreements in the region. In addition, the eventual UN process may have a merely symbolic significance, given the ineffectiveness of this organization to solve the most burning global problems, such as the attention to migrants and war.
The climate of trade liberalization prevailing in the West has weakened state action. This has diminished the role of direct taxation in taxation and facilitated financial flows, including illicit flows resulting from money laundering, drug trafficking and tax evasion. It has also encouraged the granting of extraordinary benefits to unaccountable and highly speculative foreign investment.
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