Business Coordination and Tax Politics

Abstract

Business interest groups are crucial actors for tax policy-making, but it is still unclear under which conditions they are more successful than politicians in shaping taxation. This article argues that centralized coordination and high-levels of policy integration make business interest groups more influential in the tax policy-making process. If there is no ideological convergence between agenda-setters and business, highly centralized, and well-integrated business interest groups are more successful in blocking or softening revenue-raising tax reforms, or simply transferring tax burdens to consumers or non-organized citizens. To evaluate this theoretical framework, I have compiled an original data set on business groups and associations for 18 countries in Latin America between 1990 and 2010. This theory uncovers a strong link between the patterns of business coordination and the feasibility of implementing distributive tax policies. This article also contributes to the study of business politics beyond the limited sample of developed countries.

Opting Out of the Social Contract: Tax Morale and Evasion

“…It has implications for work on state capacity more generally (Kurtz, 2013;Soifer, 2015) together with work on the shape and evolution of tax structures across Latin America (e.g. Centeno, 1997;Wibbels and Arce, 2003;Ardanaz and Scartascini, 2013;Hart, 2010;Schneider, 2013;Bird and Zolt, 2015;Fairfield, 2015;Castañeda, 2017;Castañeda and Doyle, 2019). More specifically, we contribute to the burgeoning literature on the individual-level determinants of tax compliance (e.g.…”

“…However, some work has recently begun to focus on the other side of the equation -taxation -and the often uneven and regressive form that taxation assumes across the region (e.g. Wibbels and Arce, 2003;Hart, 2010;Ardanaz and Scartascini, 2013;Schneider, 2013;Fairfield, 2015;Bird and Zolt, 2015;Castañeda, 2017;Flores-Macías, 2018;Castañeda and Doyle, 2019). Most of this burgeoning literature has focused on the macrolevel determinants of taxation and cross-country variation in Latin America more generally.…”

Progressive tax policy and informal labor in developing economies

“…But what determines the balance of corporate or consumption taxation that left governments adopt? We suggest that variation in the power of business elites could reinforce and also condition the mix of tax strategies chosen by left governments (see also Castañeda, 2017;Fairfield, 2015;Ondetti, 2017). When business elites are powerful, the options for fiscal adjustment available to left governments will be more limited.…”

“…In general, business elites will prefer lower levels of corporate tax and direct contributory tax to which they also contribute. Their ability to push for their desired preferences will depend on their concentration and organization (see Castañeda, 2017;Fairfield, 2015;Hacker & Pierson, 2002;Schneider, 2013). 3 When these groups are powerful, this should further reinforce the pressure for a move to more indirect forms of taxation, under both left and right governments (see also Fairfield & Garay, 2017).…”

“…In order to evaluate the power of economic elites, we use a metric of business coordination that combines both the degree to which business interest groups are centrally coordinated (i.e., business centralization) and the degree to which they are integrated into decisive policymaking arenas (i.e., policy integration). Castañeda (2017) builds a metric of business coordination with values of 0 for decentralized or weakly centralized business coordination (centralization is low and policy integration is weak) and values of 1 for highly centralized business coordination (centralization is high and policy integration is strong). 5 We estimate models to assess the triple interactive effects of left-right divide, informality, and the degree of business coordination (see Table A6 in the Supporting Information).…”