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Institutional Weakness and the Puzzle of Argentina's Low Taxation

Published online by Cambridge University Press:  02 January 2018

Marcus André Melo
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Abstract

Current explanations of taxation levels have identified a host of factors, such as levels of economic development and GDP per capita, tax handles, tax morale, and political regimes. But none of them can account for Argentina's exceptionalism. Using a “transaction cost politics” approach and the case of Brazil for comparison, this article argues that the key to explaining low taxation in Argentina is political instability. Systemic instability affects the tax behavior of governments. Facing an uncertain future, incumbent governments choose to extract resources from society through inflation rather than normal taxation. This article argues that political institutions, particularly federalism, contribute to instability and thereby reduce the discount rates of government policymakers.

Type
Research Article
Information
Latin American Politics and Society , Volume 49 , Issue 4 , Winter 2007 , pp. 115 - 148
Copyright
Copyright © University of Miami 2007

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