1. What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?
Latin America is characterised by constant changes and challenges; in the last 12 months, many of our countries have had political, social, and economic changes that have undoubtedly impacted tax legislation.
One of the important questions regarding all these changes could be the following: what do these changes seek – the highest tax collection, greater control on evasion, and a progressive redistribution of taxes? However, even though the average tax burden has recently grown in almost all the countries of our region, this increase has not been sufficient to meet expectations and needs in the different countries and this is why these changes have been neither harmonic nor permanent.
In fact, in many tax systems what has been sought is the achievement of greater simplicity, but unfortunately without any improvement in voluntary compliance with the new tax rules.
2. What has been the most significant impact of that change?
We can increasingly see how the tax burden is skewed on individuals and not only on companies. In my country, Colombia, an increase in taxes that individuals must now pay is evident through the decrease and elimination of tax benefits, the increase in tax rates, the reincorporation of taxes such as the wealth tax, and the tax burden imposed on dividends.
From a corporate tax perspective, all these changes have sought to align with Organisation for Economic Co-operation and Development initiatives to avoid tax evasion, and a clear example of this is the implementation of pillar two; under which, each country has started to enact the rules into its local legislations.
3. How do you anticipate that change impacting your work and the market moving forward?
As tax advisers, we are undoubtedly called to know the tax regulations that govern us and that are continually changing, as well as to understand the position and interpretation of local tax authorities, but, above all, to understand the needs and difficulties of our clients, aiming to offer clear and precise opinions that can be adjusted to this environment of legislative changes in tax matters.
We must, therefore, work as a proactive tax adviser in finding the challenges and opportunities that all these changes generate for our clients.
4. How has this changed the way you offer tax advice?
Our work as tax advisers must be speedy, almost immediate sometimes; but not only that, the advice we offer cannot only be limited to analysing the tax consequences in a particular country, but depending on the situation, it will be mandatory to carry out a tax analysis in which all the jurisdictions impacted with the activity/service/transaction are examined and diagnosed, so future consequences and tax impacts can be anticipated and, if possible, avoided.
As a consequence of the above, this entire environment has led us to work under a more global approach, focused not only on local tax and legal impact but also on offshore effects.
5. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?
I believe that the exchange of tax information between countries will continue to be the spearhead of many of our jurisdictions; this initiative, together with the determination and implementation of the concept of ‘final beneficiary’, will allow tax authorities to implement and pursue better audits and control inspection programmes across the region.
On the other hand, the digitalisation of tax systems and tax obligations, among others, will continue to be pillars within the changes proposed by local authorities.
6. What are the potential outcomes that might occur if those changes are implemented?
In a region like Latin America, what we want to achieve as one of the priority objectives is generating greater government tax collection. To achieve this, however, it is necessary to have automated fiscal processes (in terms of collection and management, for example) but also have the awareness that we have tax systems that are being operated correctly, fairly, and proportionally.
With more information, governments can establish better systems and design and implement better policies. However, we must be aware that digitalisation will not solve all the problems faced by those responsible for economic and fiscal policies, and, therefore, among many and various aspects, tax administrations must work on comprehensive and proactive reforms, allocate adequate resources in the budget, and, of course, count on international cooperation.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Changes will always represent opportunities and we, as advisers, are called to seize those opportunities for the benefit of our clients and of the public interest. All these changes force us to transform our practice, to provide added value through new services, more comprehensive services, and a broader range of solutions, to have a greater place and participation in the market.
8. Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?
In Colombia, for many years there has been the intention to have a true structural fiscal reform; in the last 12 years, we have had seven tax reforms and in 2024 we are currently talking about having a new one. All these changes have undoubtedly generated uncertainty and distrust in the tax system, and far from generating a perception that we are migrating to a better tax system, the feeling of poor tax management may have been created.
In our region, a restructuring of the tax system is required, which allows easy understanding and application of the same, and that allows the system to be perceived well under the certainty that collection of taxes is being administered correctly. In short, a simpler and more efficient system is required.
9. How do you believe those changes would help improve the tax landscape in your market?
Unquestionably, these changes would help modify the perception of the system we have, to understand it as a reliable system with clear rules, and not to see it as one in which preferential regimes prevail and where a principle of progressivity is lacking.
Without a doubt, a wide range of aspects related to the functioning of the economy, as well as specifically linked to public finances and tax policy, require updating fiscal diagnoses and undertaking a new reflection on the reform agenda that governments must address in our countries.
10. How are issues surrounding the taxation of the digital economy affecting your work?
The new ways of making transactions require a tax system by that reality. Not only that, but as tax advisers, we are challenged to quickly understand and implement these new forms of taxation to offer clients efficient and fast-acting options.
We do know the digital economy has created many benefits on a personal and corporate level, but at the same time, it has posed a challenge to current tax systems. Our role amid these advances is to make sure that current taxation rules are fit for the digital age; for instance, being proactive in suggesting new rules to safeguard fair taxation of digital activities.
11. How would you describe the tax authorities’ approach in your region/jurisdiction?
Tax administrations have been trying to update their systems and their staff and professionals to current needs. Tax administrations of the different countries in the region have actively and continuously contributed to the development of the OECD’s Action Plan on BEPS, and they are currently working and enacting many of the final recommendations into their local laws and bilateral arrangements.
Considering technology continues to automate different parts of the tax function, tax administrations are becoming more proficient in applying advanced tools like data, analytics, and artificial intelligence to modernise processes.
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