Wednesday, March 23, 2005

More taxpayers... from everywhere?

Politicians and bureaucrats design together objective tax rules that are enforced in the same way across the nation, but still there is some room for discretionary enforcement of the tax system: the effort of tax officials can be addressed more to some sectors or specific regions, and the public propaganda against tax fraud can be also focused.

So the expansion of the tax base, in number of taxpayers, is basically a
partisan-driven policy.
In the period examined here (1997-2005) Peru lived two different regimes: from 1997 to 2000, a weak authoritarian regime ruled by Alberto Fujimori, who felt in an spiral of corruption scandals in 2000, and the opposition leader Alejandro Toledo was elected in 2001.

The Peruvian tax base collapsed in 2000, in the midst of sudden corruption scandals: I observed the same for Spain during 1993-1995, but in a slower way. In Perú, the tax base also quickly grew after 2000, as the incumbent changed. In Spain, taxpayers gained inmediate confidence in their tax administration the month after the Conservative took the power instead of the Socialists. In both cases, the opposition party leaded a campaign focused in corruption scandals.

In general terms, the Fujimori regime during the 1990s was a period of undoubtless macroeconomic stability, but the long-term impact of Fujimori's neoliberal economic policies is debated. Studies by INEI, the national statistics bureau, suggest that they carried high social costs; they acerbated the already high rates of poverty that plagued Peru at the start of his presidency and led to a deep recession from which the economy has yet to recover. [5] [6] Fujimori's supporters, however, disagree with this assessment, because studies from APOYO (a peruvian research center) has shown that the extreme poverty has fallen to half in the Fujimori period. (Source: Wikipedia)

Alejandro Toledo leaded the corruption charges against the Fujimori regime, and he was elected in 2001. At the beginning of his mandate, he had a 58% of approval, but the mandate was plagued of political turmoil and strikes, and a poll in February 2005 gave him just a 10% of approval, compared to a 88% of disapproval. He has become the more unpopular president in Latin America history, much more than Alán García - who collapsed the economy a 40% at the end of 1980's.

Many people joined its party Perú Posible looking for a job, despite the leitmotiv of the incumbent was to break with a past of clientelism and corruption. Protests and internal dissent forced Toledo to began a process of positioning partisan members into the public service. But nor the macroeconomic bonanza neither the strategies to play the patronage card and to gain consent have stopped the revolts:

"In June 2002, the southern city of Arequipa was paralysed for a week by strikes and riots in protest of the privatisation of two regional electricity generating plants, the largest civil unrest in Peru for fifty years. The government had underestimated local resistance and was forced in the end to rescind the privatisations. The affair sent a clear message to the Toledo administration that its policies are highly unpopular. Despite macroeconomic growth (4,9% for 2002), Peru remains very poor indeed, with more than fifty percent of the population living in poverty, and fifteen percent in extreme poverty." Source: Wikipedia

Coming back to the original point. The incumbent basically keep the tax base by department at the same level during the Fujimori mandate, it collapsed in 2000, and it grew steadily during 2001-2005. The level of collapse was different by departments, and there is also a lot of variation in the number of new taxpayers' growth. Why?


Blogger Alex Guerrero said...


Those departments that increases their taxpayers' number on the average or beyond, decrease the % of taxes/pc compared to Lima.

Those departments that don't increase their taxpayers' number sufficiently, suffered from an increase in per capita taxes compared to Lima. (Ica from 21% to 31% of Lima taxes, with an increase of 28% compared to a mean of 70%).

What does it mean?

It's like the .gov have fixed some level of revenue by department, and some of them reach it through tax base expansion, and the other through increasing paid taxes per capita.

Why that variation?

March 23, 2005 5:30 AM  
Blogger Alex Guerrero said...

Peru Central Government revenues grew at different stages:

2000 +7,1% FUJIMORI's END
(massivly collected April-June, after elections, with losses the rest of the year, Fuji-crisis)2001 +1,1% TOLEDO

2002 +1,2%

2003 +10,3%

2004 +8,9%
(more uniformly collected)

March 23, 2005 5:36 AM  
Blogger Alex Guerrero said...

Moral of the story 01The more Toledo increase taxes, the more intense is resistance and unsatisfaction.

March 23, 2005 5:38 AM  
Blogger Alex Guerrero said...

During the last Fuji-years, Direct taxation declined.

During Toledo's real presidency (and budgets), from 2003 onwards, direct taxes, among others, steadily grew (one or two digits growth/year). THIS OBVIOUSLY CAUSES RIOTS.

March 23, 2005 5:41 AM  

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