Taxation and State Capacity

Abstract

Abstract Although Latin American tax systems have historically reflected a lack of state capacity, reforms of taxation and administration in the past few decades have strengthened states in several ways. Governments in the region still do not tax as progressively as most others in the world, but the “neoliberal” tax and administrative reforms, enacted with the help of international financial institutions from 1967 to about 2000, did raise revenue more effectively. They also laid the groundwork for greater confidence in the impartiality of tax enforcement and the control of spending. In addition, many of the same technological advances that have facilitated the evasion of taxes on capital assets and income have also aided tax innovations that enhance both equity and efficiency. Independently of these trends, the commodity boom of the 2000s helped fund an expansion of social spending. And along with a few mildly progressive tax reforms, this has brought Latin American patterns closer to the expectations of two major theories of fiscal politics, the median voter model and the idea of the fiscal contract.