Analysis of Value Added Tax: Ecuador and Chile (2000-2023)

Abstract

Introduction: The Value Added Tax (VAT) has a significant importance in the tax collection of Latin American countries. In the case of Ecuador and Chile, this tax occupies the largest share in fiscal revenues, unlike other taxes. In this context, this research analyzes the structure and application of VAT in the tax regimes of both countries, in the period 2000-2022, in order to identify best practices that promote efficient and equitable collection. Materials and methods: The methodology of the study is characterized by using a qualitative approach in terms of documentary research, deductive and explanatory analysis of both the structure and the tax reforms; as well as a quantitative approach for descriptive statistical analysis, using the time trend method, on the amounts of VAT collection. The existence of a specific, clear and correctly structured legal framework is confirmed, the result of a series of reforms aimed at increasing the amounts collected, addressing social emergencies, and strengthening the administrative efficiency of VAT in both countries. Results: The resulting analysis reveals the importance of implementing measures that turn VAT into a progressive tax, overcoming its regressive nature. Therefore, it is crucial to strengthen the incentives and exemptions of this tax for vulnerable sectors of society and those considered strategic for economic and social development. Discussion: In the case of Chile, Guerrero et al. (2024) agree with this result, noting that, despite the multiple efforts to obtain higher levels of collection, the total amounts are insufficient to meet social demands. On the other hand, Andrade et al. (2024) points out that, in Ecuador, the collection obtained from the VAT tax represents an essential mechanism for the State, due to its important participation in global collection, which allows them to meet social demands of a permanent nature. However, according to the analysis by Chávez et al. (2020), the collection of this tax is affected by avoidance and evasion factors, thus increasing the fiscal gap. Conclusions: In terms of collection, there is indeed an increase in tax revenues from VAT, however, this does not guarantee an improvement in fiscal equity or in the economic well-being of the population. Therefore, it is crucial that new research be carried out to delve deeper into the results of this analysis, especially with regard to its relationship with social factors. The study reveals important information for policy makers, academics and other actors interested in understanding the dynamics of VAT in Chile and Ecuador. These results can serve as a comparative reference for other countries in the region.