No Taxation without Efficiency? Elite Perceptions of Redistribution and Progressivity in Chile

Abstract

AbstractEven though a vast literature has addressed perceptions and beliefs on taxes, progressivity and redistribution, few studies have specifically studied the perceptions of economic elites in this regard. This group is relevant for its affluence and influence, and therefore elites’ ideas and preferences have a major impact on tax-policy configuration. This study analyses the perceptions of the economic elite on redistribution and progressivity in Chile. Based on in-depth interviews and historical documents, such notions are examined by mixing concrete evaluations of income tax and value-added tax (VAT) and more general attitudes towards the role of the tax system in economic development. Results show that redistribution is negatively evaluated, which coexists with a strong willingness to contribute to poverty relief through social initiatives outside the state. Additionally, progressivity is sidelined while highlighting growth, tax neutrality, and incentives to entrepreneurship as the main priorities of tax design. The historical analysis shows that although the Chilean tax regime has always been based on indirect taxes and levies on natural resources, neoliberal reforms and ideological renovation during the Pinochet dictatorship narrowed the general framework of tax ideas among business and political sectors and reversed progressive advances in inequality reduction and direct taxation that had been made during the previous decades.