This book is a useful introduction to the politics of taxation in Latin America. It centres on a comparison of Chile and Argentina, looking to tax policy to illuminate the well-known contrast between high and steady growth in the former and the crisis-prone trajectory of the latter. Indeed, despite the fact that both countries were seen as neoliberal reformers during most of the period examined (1989–2001), the disparities between them on tax policy, administration and politics were quite marked. The book dedicates two narrative chapters to each country, follows these with a comparative chapter highlighting key causal variables, and concludes by extending some of the analysis, and a few recommendations, to Latin America as a whole. The main argument is that tax reforms need consolidation to be effective, because without legitimacy and stability they fail both fiscally and economically. Consolidation, in turn, depends on formal and informal institutions. These include programmatically oriented parties that encompass broad societal interests (rather than particularistic or clientelistic ones), relative consensus on fiscal policy, and a coherent disposition of taxing and spending powers horizontally (across agencies) and vertically (between levels of government). Chile had these attributes but Argentina mostly did not.
The book's main substantive merits lie in its narratives of tax politics and in the connections it finds between events in the tax arena and the political environment. The author shows the benefits to Chilean policy-making of the broad and persistent Concertación ruling coalition, as well as encompassing organisations of business, namely the Confederación de la Producción y del Comercio (Confederation for Production and Commerce, CPC), and labour, namely the Central Unitaria de Trabajadores de Chile (Workers’ United Centre of Chile, CUT). One particularly telling episode came in 2001 when, facing a weak economy, a Socialist finance minister embraced a tax reform proposed by senators from the more centrist wing of the coalition, on the condition that it also receive consensual support from business (pp. 83–4). By contrast, in Argentina during these years, most tax adjustments represented technically suboptimal reactions to immediate revenue shortfalls. Tax reforms worthy of the name came only on the initiative of charismatic economy ministers in moments of grave crisis, when the president could overrule a refractory Congress, free-spending provincial power brokers and a variety of organised and clientelistic interests.
The book's theoretical approach fits well with its narratives. The author takes a fiscal-contract view of the politics of taxation, wherein tax compliance rises and tax reforms endure whenever taxpayers feel they are getting something in return, be it beneficial expenditure or reassuring adjustments to the legal and policy regime. Given that the book's main sources are contemporary news reports and elite interviews with senior officials, the reader gets a tax-authority's-eye view of policies, their technical merits and defects and the political or conjunctural reasons for what proved to be good or bad decisions. Viewed from the minister's chair, the key to a resources-for-policies exchange lies in having a broadly representative and stable interlocutor. Hence the role of parties, party coalitions, and interest organisations.
A few criticisms. Editorially, the text suffers from occasional Spanishisms and a few minor errors, such as naming the Chilean president from 1994 to 2000 as Frei Montalva (p. 49) rather than Frei Ruiz-Tagle (mistaking the son for the father, who was president in 1964–70). Substantively, the author makes adequate and informative connections to literature on the politics of taxation generally, as well as works on economic reform and policy in Latin America. However, the book's references to research on taxation in Latin America, even those comparing Argentina and Chile in this period, are sparse. Works by Delia Boylan and Marcelo Bergman are cited only in passing, those by Tasha Fairfield not at all. Perhaps as a result, tax politics seems here to be less complicated than it is. For example, the conflict between the structural power of capital and the democratic impulse to raise revenue from the wealthy finds little theoretical elaboration here, although it is described at work in both countries. Nor is the financial sector considered separately. Ultimately, the effect of attributing the problems of Argentine fiscal policy to the country's larger institutional deficiencies is to bring the reader back to familiar features of the contrast between Chile and Argentina. Observers well acquainted with the two countries will find themselves unsurprised – that is, what they might not have known, the details of tax policy evolution in the two countries over 12 pivotal years, is here explained by something they probably knew already.
Regarding policy lessons, there is a degree of tension between the author's narratives and his later, explicit recommendations. In the conclusion he observes that in order to make Latin American tax systems more progressive, as a way to help remedy the region's inegalitarian distribution of income, the revenue contribution of direct taxes, especially personal income taxes, will have to rise (p. 202). This is an opinion shared by many observers and it has an obvious justification in the region's unusually great reliance on indirect taxation. But the Chilean policy consensus, which the author presents as a model in the earlier chapters, differed: it held that revenue should be raised as efficiently as possible (that is, by the value added tax) and that redistribution should be done almost entirely via public spending (pp. 166–7). Indeed, with reform in the offing in mid-1996, the author reports, ‘everyone agreed that the income tax on individuals was too high’ (p. 58). Although he does not spell it out, Sanchez's fiscal-contract view of taxes implies that technocratic or social-justice justifications for a rise in income taxes on the rich would not suffice politically. This move would have to be accompanied by policy or institutional concessions to the people whom the state proposes to tax, that is, to the rich themselves. All in all, this is a good book, better for tax specialists than for generalists, but a welcome addition to the literature nonetheless.
