Business Power and Tax Reform: Taxing Income and Profits in Chile and Argentina

Authors

  • Tasha Fairfield

    1. Earned the doctorate in political science from the University of California, Berkeley, in 2010. She is currently a Hewlett Fellow at Stanford University's Center on Democracy, Development, and the Rule of Law and will be a visiting scholar at the Kellogg Institute, University of Notre Dame, in the fall of 2010. tasha@berkeley.edu
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Errata

This article is corrected by:

  1. Errata: Correction Volume 53, Issue 1, vi, Article first published online: 22 February 2011

ABSTRACT

This article examines efforts to increase taxation of highly concentrated, undertapped income and profits in Latin America in the aftermath of structural adjustment. Argentina has advanced further than Chile in two policy areas: corporate taxation, which taps firm-level profits; and tax agency access to bank information, which helps reduce income tax evasion. These outcomes are explained by drawing on the classic concepts of business instrumental power, which entails political actions, and structural power, which arises from investment decisions. In Chile, strong instrumental power removed reforms in both areas from the policy agenda. In Argentina, much weaker instrumental power at the cross-sectoral level facilitated corporate tax increases. Bank information access was expanded after Argentina's 2001 crisis weakened the financial sector's instrumental power and reduced structural power.

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