Tax incentives for the social sphere: A reflection on incentive laws and the case of sport in the Latin countries of South America

Abstract

Tax incentive laws are configured as a public policy that creates a special rule within the tax system in order to induce the taxpayer's behavior. In practice, it works by allowing the population to direct part of an outstanding tax to a social policy, like in sport. One of the discussed aspects of this mechanism is whether it also establishes private investments, given that the portion that the population directs to social policies is a percentage of an outstanding tax, in other words, it is a public resource. This paper explored the history of tax incentive laws for the social area, looking at Brazil, Peru, Uruguay and Chile, latin american countries that have this type of mechanism for the sports area. We identified that, in the Brazilian case, the lack of provision for the functioning of the private resources mechanism is due to the Brazilian government's fear that this would hinder the approval of this legislation in the legal instances. Peru and Uruguay have similar mechanisms, but they are focused on performance sport. In Chile, the policy covers various sporting events, but makes use of a public investment fund to balance out the distortions caused by the private allocation of resources. In the case of Brazil, Peru and Uruguay, the hosting of sporting Mega-events was a pressure factor for the approval of tax incentive legislation. As for Chile, the of high levels of sedentarism among the population contributed to the theme being strongly present in the country's General Sports Regulations.