In this chapter, I outline the practical experiences of several countries in trying to maintain a constant real progression of the rates through the indexation of exemptions and brackets. The countries are classified into four groups on the basis of the type of adjustment made. For the first group, the connection between the adjustment made and the rate of inflation is direct and complete, apart from discrepancies introduced by some of the special problems mentioned in Chapter 2. For the second group, the connection is still direct, but it is no longer complete. For the third group, the connection between inflation and the adjustment made is somewhat more tenuous, because substantial discretionary elements enter into the adjustment mechanisms. Finally, for the fourth group, although one can still talk about inflationary adjustments, and inflationary changes remain the most important factor, other elements enter the picture, so that one is hesitant to continue referring to these adjustments as indexation for inflation.

Countries with full, annual, automatic inflationary adjustments

The laws which describe the adjustment mechanisms are not always easy to interpret, but it appears that Canada, Australia, and Argentina are the only countries that qualify for this category. Up to 1974, Uruguay also belonged to this group. In these countries, the exemptions and deductions in fixed amounts, as well as the brackets, are fully, annually, and automatically increased to reflect changes in the consumer price index.