Does the Chilean government smooth taxes? A tax-smoothing model with revenue collection from a natural resource

Pastén, Roberto; Cover, James Peery

doi:10.1080/13504851003705274

Cited by 11 publications

(7 citation statements)

References 6 publications

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“…The hypothesis that political instability is one of the possible causes of fiscal disarray is consistent with the conceptual framework developed by Pastén and Cover (2010, 2011and 2015 based on the political determinants of tax smoothing and tax tilting, which they believe explain government budget deficits. Under tax smoothing (equivalent to a sustainable and efficient fiscal deficit), in order to minimize the distortionary social cost of taxes, deficits are efficient if they are the result of a policy decision not to vary the tax rate in response to transitory fluctuations in government spending.…”

Section: Introductionsupporting

confidence: 82%

“…The transmission mechanism is as follows: an increase in political instability, measured by the probability of losing power, increases the rate at which the government discounts future social costs; so, with tax tilting, a relatively more myopic fiscal government policy produces a trend toward higher fiscal deficits. Moreover, the authors show that the direction of causality is from politics (political instability) to deficits rather than the other way around (Pastén andCover, 2010 and2015).…”

Section: Introductionmentioning

confidence: 98%

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The political economy of the fiscal deficit in nineteenth-century Chile: Roberto Pastén

Pastén¹

2017

CEPAL Review

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A structural shift in the trend toward higher deficits had emerged by the middle of the 1860s in Chile. For some authors, this was the result of increased spending owing to a fastgrowing economy. Another common explanation is the higher spending required to finance and then recover from the war against Spain, which began in 1864. This article provides an alternative explanation for the country's fiscal disarray during that period, suggesting that it was motivated largely by increased political turmoil at the beginning of the second half of the nineteenth century in Chile that ended with the ousting of President Balmaceda in 1891. That period represents a dramatic departure from the calmer and economically buoyant early years of the Republic. Thus, it is suggested that the beginning of President José Joaquín Pérez's rule in 1861 marks both a major political realignment after the birth of the Republic and a structural shift in the trend toward higher deficits. This hypothesis is consistent with the idea that political instability tends to lead to a decoupling of taxes from spending, two elements which would be otherwise aligned as predicted by the tax smoothing theory. This essay is a factual description in support of this hypothesis.

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Section: Introductionsupporting

confidence: 82%

Section: Introductionmentioning

confidence: 98%

The political economy of the fiscal deficit in nineteenth-century Chile: Roberto Pastén

Pastén¹

2017

CEPAL Review

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“…La hipótesis de que la inestabilidad política constituye una de las posibles causas del desarreglo fiscal es congruente con el marco conceptual elaborado por Pastén y Cover (2010, 2011y 2015 sobre la base de los determinantes políticos de suavizamiento de impuestos e inclinación impositiva (tax tilting), que, en su opinión, explican los déficits en los presupuestos gubernamentales. En un contexto de suavizamiento de impuestos -equivalente a un déficit fiscal sostenible y eficiente-, para minimizar el costo social distorsionador de los impuestos, un déficit resulta eficiente si es el resultado de una decisión de política de no modificar la tasa impositiva en respuesta a las fluctuaciones transitorias del gasto gubernamental.…”

Section: Gráficounclassified

“…El mecanismo de transmisión funciona de la siguiente manera: un incremento de la inestabilidad política, medido por la probabilidad de perder el poder, aumenta la tasa a la que el gobierno descuenta costos sociales futuros; es decir, en el caso de la inclinación impositiva, una política fiscal gubernamental relativamente más miope produce una tendencia hacia mayores déficits fiscales. Asimismo, los autores muestran que la relación causal va de la política (inestabilidad política) a los déficits, más que en el sentido inverso (Pastén y Cover, 2010y 2015.…”

Section: Gráficounclassified

La economía política del déficit fiscal en el Chile del siglo XIX

Pastén¹

2017

Revista De La CEPAL

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A mediados de la década de 1860, se observó en Chile un cambio estructural en la tendencia, que muestra déficits fiscales más elevados. Para algunos autores esto obedeció al aumento del gasto derivado del rápido crecimiento de la economía. Otra explicación común es que fue necesario aumentar el gasto para financiar la guerra contra España. En este artículo se plantea, como explicación alternativa, que se debió principalmente a una creciente agitación política a comienzos de la segunda mitad del siglo XIX, que terminó con la destitución del Presidente Balmaceda en 1891. Esta hipótesis es congruente con la idea de que la inestabilidad política tiende a llevar a un desacoplamiento entre los ingresos tributarios y los gastos, dos elementos que, de otra manera, se mantendrían alineados, tal como predice la teoría del suavizamiento de impuestos (tax smoothing). En este ensayo se presenta una descripción fáctica que apoya dicha hipótesis. Palabras clavePolítica fiscal, déficit presupuestario, presupuestos nacionales, historia económica, Chile Clasificación JEL H21, H62Autor

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“…Cashin et al (1998Cashin et al ( , 1999 test the TSH for India, Pakistan and Sri Lanka, respectively; they find that the TSH is rejected only in the case of Sri Lanka. The others impose unit root and cointegration by using government revenue and expenditure series to test the tax smoothing hypothesis (Strazicich, 2002;Adler, 2006;Thronton, 2009, 2011;Reitschuler, 2010;Pasten and Cover, 2011). Adler (2006), which tests the TSH for Sweden, finding that tax smoothing is rejected for the period 1970-1996 but not for 1952-1999.…”

Section: Introductionmentioning

confidence: 99%

The Experience of Turkish Economy on Tax Smoothing

Bilgin

2014

International Conference on Eurasian Economies 2014

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Taxes lead a deadweight loss and this deadweight loss increases with the tax rate. The main objective of the government should be deciding the tax rate which minimizes the deadweight loss. The planned tax rate is constant or the expected tax rate is the same as the current tax rate. The ‘random walk test’ of the tax smoothing hypothesis comes out by the fact that changes in the tax rate should be unpredictable. In other words, tax smoothing hypothesis implies that a tax rate has random walk behavior, but this behavior is not sufficient condition for tax smoothing. In this paper, a direct test of tax smoothing is presented; if future tax rate is cointegrate with the current permanent government expenditure rate, the tax smoothing hypothesis holds. By using this test, it is possible to differentiate among ‘strong tax smoothing’, ‘weak tax smoothing’ and ‘no-tax smoothing’. Application of this test to Turkey shows evidence in support of weak form of tax smoothing.

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Does the Chilean government smooth taxes? A tax-smoothing model with revenue collection from a natural resource

Cited by 11 publications

References 6 publications

The political economy of the fiscal deficit in nineteenth-century Chile: Roberto Pastén

The political economy of the fiscal deficit in nineteenth-century Chile: Roberto Pastén

La economía política del déficit fiscal en el Chile del siglo XIX

The Experience of Turkish Economy on Tax Smoothing

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