(1) Tax evasion and fraud join forces in Latin America to exacerbate inequality in the region. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
SANTIAGO, Oct 14 2014 (IPS)

Corruption and tax evasion are flagrant violations of human rights in Latin America, where they contribute to inequality and injustice in the countries of the region, according to studies and experts consulted by IPS.

“Tax evasion means that those who are most vulnerable are denied the full enjoyment of their economic and social rights, including health and education,” said Rocío Noriega, an adviser on governance, ethics and transparency for the United Nations Development Programme.

“Corruption has a negative impact on the enjoyment of human rights,” she added. It also constitutes “a threat to democracy, because it systematically violates the foundation of citizenship by perpetuating inequality based on access by the few to power, wealth and personal connections,” she told IPS.

Corruption, as a way of distributing public resources for purposes other than the common good, is a serious violation of human rights, experts agreed.

In 2013 the Office of the United Nations High Commissioner for Human Rights said that, since corruption can occur in many different forms and contexts, it is almost impossible to identify all the human rights that are violated.

They added that corruption is an obstacle for the development of societies, but is also a serious problem for strengthening the legitimacy of democracy, because its prevalence and the perception of citizens of its incidence in public affairs and institutions can greatly undermine support for democratic regimes.

The 2013 Latinobarómetro poll indicates that 26 percent of all Latin Americans said they were aware of at least one case of corruption in their country in the past 12 months. A similar percentage said that nearly everyone in their government was corrupt.

Venezuela and Mexico top the ranking for perception of corruption, with 39 percent making these statements, followed by Paraguay (38 percent) and Chile (35 percent). Among the countries with the lowest perception of corruption were Uruguay (19 percent), Nicaragua (17 percent), Honduras Guatemala and Brazil (16 percent), and El Salvador (eight percent).

Francisca Quiroga, a political analyst and expert on public policies at the University of Chile, told IPS that both corruption and tax evasion are directly correlated to inequality and injustice.

She said: “Tax policies are a potential instrument for distributing resources and funding the development of social policies.

“The underlying rationale is the duty to combat inequality and to redistribute resources, as well as to build more sustainable economies,” she said.

“When talking about human rights and social rights, in particular, one of the elements to take into account is taxation policy, and the institutional mechanisms to ensure the legitimacy of the decisions taken,” she said.

High inequality is one of the most distinctive characteristics of Latin America’s social situation.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), income distribution inequality in the region is substantially higher than in other global regions, with an average Gini coefficient of 0.53.

The Gini coefficient is a measure of income inequality, expressed as an index between zero and one. Zero represents perfect equality, while a value of one represents complete inequality.

For example, the least unequal country in the region is more unequal than any non-Latin American member of the Organisation for Economic Co-operation and Development (OECD), or than any country in the Middle East and North Africa, according to a report titled “Evasión y Equidad en América Latina” (Evasion and Equality in Latin America) by the ECLAC Economic Development Division.

The five Latin American countries with the worst income distribution, according to the report, are Brazil, Guatemala, Honduras, Paraguay and Chile, in that order.

In Chile, most employed people earn around 500 dollars a month, in a country where bread costs two dollars a kilo, while the richest 4,500 families live on more than 30,000 dollars a month.

“Tax evasion is a form of fraud that undermines equality, there is no doubt about it,” sociologist Marta Lagos, the head of Latinobarómetro, told IPS.

“There is massive empirical evidence that shows that income distribution improves when taxes are paid,” she said.

“The lack of formality of our state agencies allows tax evasion to occur,” and this may happen in powerful and wealthy circles as well as among ordinary citizens, she said.

She calls this phenomenon “social fraud,” pointing to its basis in customs overwhelmingly regarded as acceptable in social practice, so that the state is unable to eradicate it. “It is customary, however wrong, illegal and immoral,” she said.

Lagos stressed that social fraud may be wrong, immoral or illegal. Wrongness refers to offences that are not legally penalised but affect coexistence, such as parking a vehicle badly and paralysing traffic. Immoral acts include situations like eating something while shopping in a supermarket and not paying for it.

Illegal social fraud, in turn, may occur on a mass scale and covers those who avoid paying for a bus ticket, use state subsidies improperly, or evade paying taxes.

In Chile, as in other Latin American countries, it is common practice for retail outlets in outlying neighbourhoods not to issue receipts for every purchase, said Lagos, and this is wholly accepted by the population.

“I don’t really care,” Bernarda, a middle-aged woman who buys bread every day from a small store near her home in La Florida, a mainly middle class suburb southeast of Santiago, but who does not always receive a formal receipt for her purchase.

“I have known this woman (the store owner) for years and I know she is honest,” she said. “It’s all the same to me,” said another neighbour beside her. “What do I want a tax receipt for? Anyway, everybody does it,” she said.

This behaviour is widespread in the region and is reflected daily in the question that retailers and service providers in many countries constantly ask consumers when it is time to pay: “With IVA (value added tax) or without IVA?”

Lagos said that over the past decade tax evasion has come to be seen as increasingly legitimate, since corruption in high places “increases people’s perception that it is acceptable not to pay taxes, because the money is being stolen and misspent.”

Quiroga, however, believes the time has come for citizens to realise that their political and social rights are infringed whenever the system allows tax evasion and corruption to become common practice.

“This is the only way we are going to be able to overcome this scourge,” she said.

Edited by Estrella Gutiérrez/Translated by Valerie Dee

Like many Chileans, Alejandro, who owns a small supermarket, hopes the next government will curb social inequality. Credit: Marianela Jarroud/IPS

By Marianela Jarroud
SANTIAGO, Nov 15 2013 (IPS)

Voters fed up with the extremely unequal distribution of wealth and power in Chile are expected once again to elect a centre-left government Sunday.
According to the latest poll by the Centro de Estudios Públicos (CEP), a local think tank, former socialist president Michelle Bachelet (2006-2010) is set to win outright in the first round of voting, with an at-least 30 percent lead over Evelyn Matthei, the candidate for the governing right-wing alliance.

Bachelet needs 50 percent plus one vote to avoid a run-off – which only occurred once, in 1993, since democracy was restored after the 1973-1990 dictatorship of General Augusto Pinochet.

But CEP also projected a low turnout, as did the Latinobarómetro Report 2013, which found that Chileans were highly critical of the system because the economic prosperity of the last 20 years has only been enjoyed by a minority of the population.

According to the World Bank, per capita income in Chile is 21,500 dollars a year.

But in this South American country of 17 million, two out of three households have incomes of less than 1,200 dollars a month and are heavily in debt, according to the Fundación Sol, a non-profit organisation that focuses on labour and social issues.

And over half of all workers earn less than 500 dollars a month.

By contrast, the wealthiest 4,500 families have an average monthly income of over 40,000 dollars.

Poverty is measured by the “national socioeconomic survey”, which estimated the poverty rate at 14.5 percent of the population in its latest edition, in 2011.

But to gauge poverty, Chile only takes into account the monetary aspect. A person is categorised as poor if they earn less than 144 dollars a month in urban areas or less than 100 dollars a month in rural areas.

This cut-off line is based on the cost of the basic basket of foods – which was constructed in 1987 with products that Chileans no longer even consume, such as cooking oil sold in bulk.

Experts agree that if the methodology for estimating poverty were updated, the rate could climb as high as 28 percent.

That explains the roots of the discontent that has fuelled a wave of protests and demonstrations since 2011 and threatens to pose a major challenge to the government that takes office in March 2014, if the profound changes demanded by Chileans are not forthcoming.

Economist Gonzalo Durán at Fundación Sol told IPS that “many indicators depict the country in a very positive light,” but that access to the trappings of development was limited.

He stressed that inequality is so marked that the richest five percent of the population have incomes 270 times those of the poorest five percent.

And he said that gap doubled between 1990 and 2011, which meant that “according to this indicator, inequality in Chile has increased 100 percent in the last 20 years.”

Durán cited a University of Chile study which shows that the wealthiest one percent accounts for 30 percent of all income – compared to just under 22 percent in the United States, for example.

Sociologist Alberto Mayol told IPS that “poverty is definitely a very urgent issue. But inequality is not the same thing as poverty, and in Chile it has never been addressed by public policies.”

In societies in general, he said, a not insignificant portion of the population tends to be left out of benefits and bears the brunt of the policies dictated by the country’s social model.

“That proportion is generally around 30 percent. But in Chile, for example, 60 percent of workers suffer from precarious employment.”

Chileans, who are generally not familiar with these hard-hitting statistics, live with them nonetheless day to day. Many people in this country cannot afford a decent diet, and millions rack up credit card debt just to buy their groceries.

Alejandro, 62, and Juanita, 56, a couple who worked hard to have their own small supermarket on the south side of Santiago, hope the next government will finally address the needs of people like them.

At great sacrifice, they managed to send their two children to university. Their daughter still lives at home, and they give their son help when he needs it. “Both of them went to the university, thanks to our blood, sweat and tears,” Alejandro says with emotion.

“I don’t care who governs; work is my government,” he adds, before stating that “people have to take to the streets to protest because being able to do that is one of the important things about democracy, and because there are many reasons to do so.”

His wife, however, says it is very important that the right does not govern, because when it does, “the rich continue to call the shots, and the middle and lower classes continue to sink further and further.”

Mayol said Chile is reaching Sunday’s elections “at a time of acute protests challenging the fundamental values and cultural conditions of this model of society.”

The election of multimillionaire business tycoon Sebastián Piñera as president in 2010 “was the cultural triumph of profit as a form of social relations, as a political mechanism.” But as the right-wing president’s four-year term is coming to an end, “profit is akin to Satan in Chile,” he said.

The analyst said “the economic, political and institutional model is suffering a crisis of legitimacy, and in politics, legitimacy is like motor oil – it prevents friction.”

Once Bachelet wins the elections, he said, she will have to defend her new coalition, Nueva Mayoría (New Majority), which represents “a confluence with the social movements of the old Concertación,” the centre-left coalition that governed the country from 1990 to 2010.

To do that, he said, she will have to govern together with representatives of social movements, like two former student leaders – Camila Vallejo of the Communist Party, and Giorgio Jackson, an independent – both of whom have a strong chance of being elected to Congress.

On Sunday, voters will also elect the 120 members of the lower house, and 20 of the 38 members of the Senate. In addition, regional advisers, who will act as liaisons between the citizens and the government, will also be elected for the first time.

Bachelet will have to live up to her main campaign pledges: tuition-free higher education for all within the next six years; a tax reform making it possible to finance this; and the most strongly-voiced demand – a reform of the constitution left in place by former dictator Pinochet, which is still in force.