The Politics of Fiscal Legitimacy in Developmental States: Emergency Taxes in Argentina Under Kirchnerism

ABSTRACT

In times of crisis, governments can resort to tax rises and emergency taxation schemes to finance extraordinary needs. These schemes often generate tensions in the fiscal contract between the state and society, as they affect basic definitions regarding who is taxed, for how much, and what for. In the context of developing economies, where available sources of extraordinary rents are limited, dealing with these tensions can be problematic as it involves reconciling questions of fiscal legitimacy with the interests of influential economic sectors. This article analyses these tensions by exploring the case of Argentina in the aftermath of the 2001 debt default crisis, when emergency taxes on agricultural exports were implemented and then expanded under Kirchnerist administrations pursuing a ‘post-neoliberal’ developmental agenda. However, we argue that the government failed in legitimating this fiscal agreement, resulting in a tax rebellion by the rural sector in 2008 followed by the growing polarisation of the policy in partisan terms. By bringing to the fore the challenges and conflicts involved in legitimating tax collection, the article illuminates an overlooked aspect of the political economy of developmental states, particularly those seeking to enhance state autonomy while pursuing redistributive goals.

KEYWORDS:

• Emergency taxation
• fiscal contract
• state capacity
• Argentina
• Kirchner

Acknowledgement

The authors would like to thank Jean Grugel and Ingrid H, Kvangraven for their helpful comments and advice on earlier versions of the article. They also would like to thank the two anonymous reviewers and the editor for their insightful feedback.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Most export taxes were abolished in December 2015, while the tax of soy, the principal export product of Argentina, was reduced five per cent. Some were reintroduced in September 2018, in a new context of crisis and at a relatively low level, with President Macri declaring ‘we know this is a bad tax but it is an emergency’ (Agrofy 2018).

2 This idea relates with Mann (1984)’s two meanings of state power, ‘over’ and ‘through civil society’, and his observation that capitalist democratic states are characterised by high infrastructural power and low despotic power.

3 Hence, we do not assume any legitimacy expectation from the nature or level of agrarian rents. For a discussion on the concept of ground rent both in the context of Argentina and other primary commodity-producing countries, see Ward and Aalbers (2016), Grinberg and Starosta (2014), and Iñigo Carrera (2006).

4 For this reason, other authors used less benevolent terms to capture their accumulation models, with Mazzuca (2013) talking of ‘rentier populism’ and Richardson (2009) of ‘export-oriented populism’. A second strand of political economic analysis emphasises the ‘extractivist’ or ‘neo-extractivist’ logic of these political projects and their negative socio-environmental implications (Veltmeyer 2012, Svampa 2013, Burchardt and Dietz 2014).

5 While state capacity, understood as the institutional ability the state has to induce people and organisations to act in a desire manner, and state autonomy are usually discussed in tandem, our discussion revolves mostly around the latter, as we are not evaluating here any enhancement or decrease of institutional taxing capacities. See Cingolani et al. (2015) for a detailed discussion.

6 Irrespective of using the terms ‘sector’ or ‘sectors’ we acknowledge the heterogeneity of the actors in the agricultural supply chain, with the main peak organisations representing different interests, often in conflict with each other. Thus, founded in 1866, the SRA represents large producers and landholders while the CRA is composed of regional federations, both being the more conservative market-friendly groups. The FAA and CONINAGRO instead, represent smaller local producers and service cooperatives and maintain more leftist and often pro-Peronist leanings. Interestingly, opposition to export taxes is one of the few areas where all organisations historically share a similar view. See Gras and Hernández (2016).

7 The ISI model was championed by the UN’s Economic Commission for Latin America (CEPAL), led from by Argentine economist Raúl Prebisch, who was the first General Manager of Argentina’s Central Bank (Payne and Phillips 2010).

8 As noted in Romero (2002, p. 103), legal restrictions and the scarcity of machinery (as imports were not given preferential treatment) exacerbated the decline of cultivated land and ultimately volumes available for export.

9 The relationship between these stop-and-go cycles and balance of payment crises has been explained partly due to foreign currency needs generated by an incomplete ISI process. See Fiszbein (2015).

10 Pérez Trento (2021) offers an alternative though not incompatible explanation, claiming that currency overvaluation generated less contention as its effects were less visible to economic actors, and so was the appropriating role of the state.

11 President Kirchner would set a trend to be continued during his administration and his wife, avoiding the annual opening ceremony of the SRA, until then commonly attended by the President and high officials.

12 In the case of soy, more rapid price increases furthered an ongoing ‘boom’, with producers expanding the planted surface and switching to this more profitable crop (Leguizamón 2014).

13 Energy and fuel-related spending grew 350 per cent in this period, while transport increased 200 per cent.

14 Tampering with the inflation measure had impact on GDP growth and poverty, allowing the government to show sustained improvements. See table 2.

15 As export taxes were determined by price and not by actual earnings, smaller producers and those located in less fertile regions faced higher tax per hectare (Rodríguez and Arceo 2006).

16 Bonvecchi and Giraudy (2007) indicate that the public sector would actually been in deficit already in 2007 if it were not for the contributions of emergency taxes and transfers form the recently-reformed pension system.

17 While direct taxes belong to the provinces, export taxes and import fees fall under federal jurisdiction. Many provinces, particularly in the more impoverished north, are heavily reliant on federal fiscal transfers, a regime called ‘Coparticipación’, providing a mechanism for the government to discipline provincial actors (Cetrángolo et al. 1998, Bonvecchi and Lodola 2011).

18 President Fernández de Kirchner was elected on 28 October 2007 and was inaugurated as President on 10 December 2007.

19 It is relevant to note that CFK was defeated in Buenos Aires federal district, Córdoba and Rosario, the bigger cities, with the bulk of her vote coming from the working-class and highly dense Buenos Aires suburbs, and from impoverished provinces distant from urban centres (De Riz 2008).

20 The exchange rate remained stable around 3 pesos per dollar until mid-2008, when it started devaluing.

21 Julio Cobos was a member of the UCR party, and as such, a remnant of President Néstor Kirchner’s early commitment to ‘tranversalism’.

22 A soy trader interviewed by Giraudo (2017, p. 173) notes his realisation, upon meeting public officials after the protests, that the officials considered agribusiness was administering wealth that did not belong to them.

23 The fiscal solidarity of urban middle classes can be accounted for, to a certain extent, on the basis of Dborkin and Feldman (2008, p. 220)’s observation that despite a lower overall burden, tax rates in Argentina are often equivalent if not higher than in many developed economies, so that ‘[…] whoever pays all her taxes, faces a real tax burden much higher than the “average” resulting from the coefficient between collection and GDP’. It has to be said that not only centre and centre-right parties supported the countryside during the protests, but so did some Peronist (but not Kirchnerist) leaders, and many small radical left parties, which considered the government advanced over the interest of rural workers.

24 The Mesa de Enlace would break in March 2013, when the FAA did not join a lock out called by the other three organisations to protest against inflation, fiscal pressure, and the political use of export permits.

25 As mentioned, Alberto Fernández was elected president in 2019, with CFK as his vice-President.

26 This does not mean rural protests fully stopped, with the Mesa de Enlace and rural federations organising mobilisations and strikes from 2009 onwards, and numerous lock-outs launched by local producers, particularly in the littoral and North-eastern provinces (Krakowiak 2009, Mangonnet and Murillo 2020).

Additional information

Notes on contributors

Matt Barlow

Matt Barlow is a Research Associate in the Interdisciplinary Global Development Centre (IGDC) and PhD candidate in the Department of Politics at the University of York. He researches on the political economy of taxation and the politcal economy of development in the Global South. Wider research interests include issues of emergency governance, regionalism, global health and the political economy of gender.

Alejandro Milcíades Peña

Alejandro M. Peña is Senior Lecturer in International Relations at the University of York and researches on issues of state-society relations and contentious politics, Latin American politics, and international relations.