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					Tax-building and State-building
  in an Age of Globalization:
   Actors, Institutions, and
           Processes
          Aaron Schneider
        aarons@tulane.edu
             Thanks and Sorry
• Thanks
  – Alberto Barreix, BID; DFID
  – Hugo Noe Pino, Honduras; World Bank
  – Alex Segovia, Jorge Vargas Cullel, Leticia Gonzales,
    Julio Francisco Baez Cortes
  – Panelists – political science
• Sorry
  – Language
  – Outsider
  – Crisis
                 Prevailing View
• Why reforms fail
  – Politics as an obstacle to good economics
     • Not “lack of political will”
• We need a theory of why reforms pass
  – To build that theory, we need to know what these
    reforms mean
     • Role of the state, fiscal pact
     Tax-Building and State-Building
• Central American states are being (re)built in the
  face of globalization
  – Taxation indicators
     – Amount of resources mobilized, universally or particularly
       applied, and degree of progressivity or regressivity
     – Sociopolitical Relationships: State Legitimacy and Capacity
        – Anglo-saxon tradition – No taxation without representation
        – Continental tradition – Rational-legal, autonomous bureaucracy

• Methodology
  – Quantitative: Cross-national, internal variations
  – Qualitative: Pathway cases and Method of Difference
   Actors, Interests, Processes of Tax
                 Reform
• Actors
   – Imbued with interests and capacities with respect to
     the kinds of reforms they would like and their ability
     to advance them
• Institutions
   – Include incentives towards reform and constraints on
     reform
• Processes
   – Characterize the dynamic way in which actors come
     together in sequences, interactions, and feedbacks
     within institutions to produce policy outcomes
• Tax Reforms
   • Amount, Universality, Progressivity
     Actors
•Effective Parties, Last Four Elections      Guatemala 3.73        2.54     2.35   4.64
      •Effective Number of Parties is the
                                             El Salvador 4.13      3.49     3.40   3.04
      Lakso-Taagpera Indicator:
      1/Sum(p2).
                                             Nicaragua    2.90     2.57     2.08   3.14
                                             Costa Rica   2.30     2.56     3.74   3.20

                                             Honduras     2.03     2.15     2.41   2.37



                                                                 Left     Right
•Polarization
                                                    El Salvador 1.94      7.67
     •Left and Right from 10 point factor
     scale on items from Survey of                  Nicaragua    2.63     6.69
     Parliamentary Elites in Latin America          Costa Rica   4.85     6.18
     Source: From Zoco (2006, 265)
                                                    Honduras     5.65     7.03
                                                         FDI in CR
                                                         US$mi


Inversion Extranjera Directa %PIB
        1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
CA        1.3 1.5 1.6 1.7 1.9 1.6        2 3.6     6 3.6 2.9 2.6 2.2 2.6
CR        2.2 2.5 2.6 2.6 2.8 2.9 3.6 3.2 4.3 3.9 2.6 2.8 3.9 3.3
ES          0 0.5 0.3 0.2                    0.5 9.2 1.7 1.3      2 3.3 1.2
GT        0.6    1 0.9 1.2 0.5 0.5 0.5 0.5 3.5 0.8 1.2 2.2 0.5 0.5
HO        1.5 1.7 1.4 1.5 1.2 1.8 2.2 2.7 1.9 4.4 4.7 3.1 2.7 3.6
NI             2.5 2.3 2.3 1.3 2.4 2.9 5.1 5.5          8 6.8 3.7 5.1 4.9
         Institutions
•   There is a range of institutional
    relationships across countries. While
    the executive branch in El Salvador is
    not the most powerful in the region,
    it is far more powerful than in
    Nicaragua and Costa Rica, where the
    executive is limited severely by a
    relatively strong legislature and, in
    the case of Costa Rica, the judicial
    branch.                                           Voice
•   On World Bank Governance                          &          Politic    Gover     Regula             Contro
                                                      Accou      al         nment     tory               l of
    Indicators from 2005, Costa Rica                  ntabilit   Stabilit   Effecti   Qualit   Rule of   Corru
    clearly scored the highest, and                   y          y          veness    y        Law       ption
    Guatemala the lowest. The other          Costa
                                             Rica           1          1          3        2         2        2
    three countries show some internal       El
    variation, depending on the              Salvad
                                             or            10         10          9        3         8       11
    dimension.                               Nicara
                                             gua           11          9         15       13       13         9
                                             Hondu
                                             ras           13         14         14       15       11        14
                                             Guate
                                             mala          17         17         17       11       17        15
                                                    Tax Policy
Countries in the region have only moderately increased revenues,
which remain below the regional average




           Raw mat, cap   Income tax   Sales/Valu   Asset tax   Municipal   Limits on    Local input
           imports,                    e added                  taxes and   domestic     + forex
           profit repat                Tax                      fees        sales        regul         Also evident
Costa      100%           100% for 8   100%         100%, 10    100%, 10    25% manuf,   None
Rica                      years, 50%                years       years       50% svc                    is the large
                          for next 4
El         100%           100%, 20     100%, 10     100%        100%, 20    None         None
                                                                                                       number of
Salvador
Hondura    100%
                          years
                          100%
                                       years
                                       100%         100%
                                                                years
                                                                100%        5% manuf,    None
                                                                                                       privileges to
s                                                                           50% svc                    particular
Nicarag    100%           100%, 10     100%         100%        100%        20-40%       None
ua                        years                                                                        sectors
Guatem     100%           100%, 12     100%         100%        100%        20% manuf    None
ala                       years
• Traditional parties (PL, PN) occupy
  most legislative seats, take centrist                                                     Honduras


  ideological positions, and coopt                              10




  potential alternatives.




                                          Inclusive-Exclusive
                                                                                                                                   PL


• Business elite coordinates through                             5
                                                                                                                                   PDCH
                                                                                                                                   PN
                                                                                                                                   PINU-SD


  peak associations, social networks.
• International and domestic                                     0
                                                                     0                          5                             10
                                                                                           Le ft-Right

  technocrats pressure government
  and occasionally govern.                                                            INSTITUCIONALIDAD
                                                                                      DE LA PARTICIPACION
• Institutions facilitate participation                                                             Integración del Consejo
                                                                                                     Consultivo de la ERP


  by external and local elites, but                                      Gobierno                            AMHON                      Sociedad Civil



  constrain actions within limits of                             • Ministerio de la
                                                                   Presidencia
                                                                 • Seis Secretarías de
                                                                   Estado
                                                                                                         • Un representante        • Doce representantes



                                                                                                                                    • Centrales Obreras


  cooptation.
                                                                                                                                    • Centrales Campesinas
                                                                                                            Comunidad               • Mujeres
                                                                                                           Internacional            • Juventud y niñez
                                                                     •   SEFIN                                                      • Empresa Privada
                                                                     •   S. de Educación                                            • Patronatos
                                                                     •   S. de Salud                   • Dos representantes         • Pueblos Étnicos
                                                                     •   SERNA                                                      • ONG´s
                                                                                                       • Como Observadores
                                                                     •   SGJ                                                        • MIPyMES
                                                                     •   SAG                                                        • Sector Social de la Economía
                                                                                                                                    • Discapacitados
                                                                                                                                    • Adultos Mayores
El Salvador
•Political parties
significantly polarized.
Governing party potential
for majority with votes of
right-wing, illiberal party.
•Few constraints on
executive, which has
systematically eroded
other powers of
government, and failed to
defend them when
attacked by powerful
sectors.
Revenues in Honduras: Amount, Proportion, and Progressivity

                                Tax Proportions
                                   Honduras


        100%                                                Other Indirect

         90%
         80%                                                Social Security*
         70%
         60%
                                                            Specific Goods and Services
         50%
         40%
         30%                                                General Goods and Services
         20%
         10%
                                                            Commerce and International       Source: Gomez
          0%                                                Trade                            Sabaini 2003;
                                                            Direct Tax Receipts              2007




Bracket 1st       2nd     3rd       4th     5th     6th       7th            8th     9th      10th    All

Total     41.15   36.65   34.75     32.45   29.70   27.71     26.06          26.00   22.75    18.95   23.53
  Quantitative Analysis of Legislation
         Callejas Reina     Flores    Maduro Zelaya
Total    15        10       12        27       3
Targeted 8         7        8         16       3
General 10         3        5         12       0
Administ 8         4        2         12       0
rative
                Year of Laws      Average Targeted General Administ
                Mandate Passed per Year                    rative


               1st      20       4        13      10      13
Author
calculations   2nd      22       4.4      15      9       4
based on       3rd      11       2.75     6       6       5
Matute Lopez
(2008)         4th      14       3.5      8       5       4
               Total    67       3.95     42      30      27
               Quantitative Analysis of
                  Legislation: ES
                Cristiani     Calderón Sol   Flores         Saca
Total           39            32             35             42
Específicos     24            20             22             33
Generales       11            5              10             6
Administrativos 14            13             20             21
    Fuente:: Cálculos propios usando Vásquez López (2008)

Año     Reformas   Promedio       Específicas      Generales       Administrat
1st     44         11             27               7               23
2nd     19         4.75           11               3               11
3rd     31         7.75           22               11              13
4th     29         7.25           22               9               9
5th     25         6.25           17               2               12
Total   148        7.4            99               32              68
       Erosion and Tax Capacity
• Erosion: Incentives, Exemptions, Special
  Regimes
• Tax Capacity through Transnational
  Collaboration
  – Same Actors: Political elite, Economic peak
    associations, Technocrats
  – Same Institutions: Congress, Executive
  – Different Processes: Moments of political
    distraction versus moments of political stalemate

				
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posted:9/10/2011
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