Authorities reaffirm importance of fiscal covenant

Constructing fiscal covenants and the importance of maintaining stable economic growth are two key factors in increasing tax income and improving equality, according to experts who met at the ECLAC headquarters in Santiago, Chile, at the 25th Regional seminar on fiscal policy.

The meeting, organised by the Economic Commission for Latin America and the Caribbean (ECLAC) with the support of the International Monetary Fund (IMF), the World Bank, the Inter-American Development Bank (IDB) and the Organisation for Economic Co-operation and Development (OECD), is being attended by the Ministers of Finance of Chile, El Salvador and Uruguay, as well as by renowned international experts.

The meeting was opened by Alicia Bárcena, Executive Secretary of ECLAC, who emphasized the importance of the seminar, which after 25 years has become an essential reference point in discussions of the region’s economic and fiscal situation. Bárcena said: “In order to achieve equality - which is an ethical guideline and a strategic vision for our region’s present and future development—we need a new relationship between the State, market and society including fiscal and social covenants.”

The Executive Secretary of this UN Commission added: “In this sphere, fiscal policy plays a crucial role and the clear aims of fiscal covenants must be to: increase tax revenues by making them progressive, reduce evasion and increase the capture of income from natural resources.” The Finance Minister of Chile, Felipe Larraín, gave a presentation at the opening ceremony that stressed the relevance of economic growth as the main source of collecting fiscal revenues.  

He said “tax reform helps collection, but it is not the only factor. The State can collect much more if it has sustained and powerful growth”. Finance Minister of Salvador, Carlos Cáceres, explained the various tax reforms implemented in his country in recent years. While he agreed that growth was important for achieving good levels of collection, he also highlighted the need for other instruments such as monetary policy and support from multilateral institutions to achieve social targets.