Few tasks are as crucial for the future of democracy in Latin America--and, indeed, in other underdeveloped areas of the world--as strengthening the rule of law and reforming the system of taxation.
In this book, Marcelo Bergman shows how success in getting citizens to pay their taxes is related intimately to the social norms that undergird the rule of law. The threat of legal sanctions is itself insufficient to motivate compliance, he argues. That kind of deterrence works best when citizens already have other reasons to want to comply, based on their beliefs about what is fair and about how their fellow citizens are behaving. The problem of "free riding," which arises when cheaters can count on enough suckers to pay their taxes so they can avoid doing so and still benefit from the government's supply of public goods, cannot be reversed just by stringent law, because the success of governmental enforcement ultimately depends on the social equilibrium that predominates in each country. Culture and state effectiveness are inherently linked.
Using a wealth of new data drawn from his own multidimensional research involving game theory, statistical models, surveys, and simulations, Bergman compares Argentina and Chile to show how, in two societies that otherwise share much in common, the differing traditions of rule of law explain why so many citizens evade paying taxes in Argentina--and why, in Chile, most citizens comply with the law. In the concluding chapter, he draws implications for public policy from the empirical findings and generalizes his argument to other societies in Africa, Asia, and Eastern Europe.
Marcelo Bergman is Associate Professor in the Department of Legal Studies at CIDE in Mexico City and the director of PESED (Program for the Study of Security and the Rule of Law). He has served as a consultant to tax administrations in Argentina, Chile, and Mexico.
Contents List of Figures and Tables Preface and Acknowledgments Introduction 1. Compliance and Enforcement 2. Measuring Tax Compliance in Chile and Argentina 3. Taxpayers' Perceptions of Government Enforcement 4. General Deterrence: Impunity and Sanctions in Taxation 5. Specific Deterrence and Its Effects on Individual Compliance 6. The Role of Trust, Reciprocity, and Solidarity in Tax Compliance 7. Social Mechanisms in Tax Evasion and Tax Compliance Conclusion: Tax Compliance and the Law Appendix A: On the Data Appendix B: A Game Theory Approach to the Logic of Tax Compliance Appendix C: A Simulative Game: The Effects of Enforcement Appendix D: The State, the Law, and the Rule of Law References Index