Tax Institutional Performance and Institution in Paraguay

This work examines tax performance in Paraguay over the last eleven years (2006-2015). It comprises four themes: tax revenues, tax compliance, tax expenditures, direct taxes and tax institutions and equity. The average tax/GDP ratio in this period was 11.7%, of which direct taxes were only 19.8%. Both ratios were below the Latin American region average. Fight against tax evasion did not increase the tax/GDP ratio. On the contrary, this ratio decreased from 12.7% in 2014 to 12.5% in 2015, even though the internal revenue service (SET) has been more successful than Customs (DNA) in this endeavor. Tax expenditures were estimated at 1.69% of GDP in 2015. A new law of fixed taxation on corporate income tax might increase tax expenditures in the future. Direct taxation contribution (IRACIS, IRAGRO, IRP and property tax) to tax revenues, remains low. Proposals to increase contributions are suggested. Better and fair tax regime is needed and it requires more discussions among different political and social actors. The Paraguayan economy presents a highly concentrated productive structure with high unequal income distribution. Therefore, vertical tax equity is essential to reduce inequality