No.74 Migrant Remittances and Local Taxes in Latin America

Ana Isabel López García

Abstract

This paper departs from the previous literature that considers only the national level and formal taxes when investigating the relationship between migrant remittances and tax attitudes in origin countries. In contrast to earlier research linking migrant remittances to lower tax revenues and higher tolerance for tax evasion, it is theorized that local-level remittance recipients are more likely to pay taxes. In line with expectations, an analysis of AmericasBarometer data shows that receiving migrant remittances is associated with a greater willingness to pay higher municipal taxes in return for better services. Furthermore, statistical results show that recipients’ greater conditional compliance correlates with higher trust in local authorities, increased demand-making on local authorities, and closer engagement in community affairs, including making tax-like payments for financing community improvement activities. A local perspective can offer a better understanding of the tax attitudes of migrants and their families and the nature of state-society relations in migrant-sending countries.

Keywords: public goods, taxation, local governments, migrant remittances, Latin America