A REVIEW OF TAX POLICIES AND ADMINISTRATION IN BOLIVIA

The 1986 tax reform in Bolivia was one of the most radical effective changes of tax policies that any country has undertaken in modern times. After the reform the country was left with a uniform rate of tariff, a uniform value added tax, a set of taxes to complement the vat, a set of excise taxes on specific consumption items, a low turnover tax, a presumptive income tax on corporations, a property tax, and an inheritance tax. Five years later, the tax policies remain largely the same. Bolivia is facing a major revenue shortfall in the next two years. Sales of natural gas to Argentina have been an important source of the revenues of the government and they are anticipated to fall substantially over the next 2 or 3 years. To offset this decline in revenues, and to meet increased government obligations, it is proposed that revenues will have to increase by 1.5 per cent of GDP next year and 2.0 per cent of the GDP in the following year. The strategy to meet this revenue gap is to first improve the administration of taxes to the greatest degree possible and then to consider new tax bases and higher tax rates.