Chilean Tax Policy Tested by New Political and Economic Conditions: 1996–2001

The second half of the 1990s provided a number of significant challenges to the survival of the “growth with equity” socioeconomic compromise, the seeds of which can be discerned from the previous chapter. These came not only from business and the political right, but also from the left. Entrepreneurs made much noise in their opposition to tariff reductions that were to be fiscally compensated by tax raises, arguing in terms of loss of competitiveness. The political right also called for a reduction of social expenditure, so as to allow for a lower overall tax burden that would not compromise fiscal discipline. However, the Concertació. doggedly and systematically rejected any suggestions to embark on a direction different from the overarching one it first devised in the 1990 campaign. This chapter will show how astute political management, as well as features proper of a highly institutionalized political setting allowed the government to deflect pressures to deviate from fiscal policy tenets inherent to the “growth and equity” model.