Institutional Correlates of Tax Reform Consolidation: Success in Chile and Failure in Argentina

Chapters one through four have provided an empirical account of tax policy and administration reform efforts in Argentina and Chile, embedding them in the evolving politico-economic environment of the 1990s. This chapter seeks to present a more conceptual analysis that will clarify the reasons for the very different reform patterns and outcomes documented in the preceding chapters. A number of key variables have shaped prospects for the consolidation of tax reform—defined as the consensual acceptance of tax policy changes so that a new pattern of interaction comes to define the state-society fiscal rapport. Four overarching factors that have fostered tax reform consolidation in Chile are emphasized in this chapter: a strong institutional setting (including a capable state and an institutionalized party system), institutions that foster fiscal discipline and macroeconomic stability, the prevalence of encompassing organizations that facilitate collective action, and informal institutions that promote policy reform consolidation (a pattern of inclusive pact makings, called democracia de los acuerdos; and the enshrinement of policy stances that garner consensus, called politicas de estado). In Argentina, by contrast, a weak and politicized state, an underinstitutionalized party system, the absence of encompassing civil society organizations, and the presence of injurious informal institutions (particularly clientelism) have all conspired against state-building in the taxation arena.