Time-varying tax rates, defined as tax rates that hinge on the
state of the business cycle, have been used sporadically in
different countries and under different circumstances. In the late
sixties, for example, the U.S. Government hiked temporarily income
taxes to counter the effect of fast-growing economic activity on
inflation.2 On the other hand, countries such as Japan and Thailand
have used in recent years temporary tax breaks to attempt to boost
economic activity during times of recession. In the case of Chile,
the issue of variable tax rates for counter-cyclical purposes has
been in the academic and political arena for the last few years.3
In contrast with the occasional use done by some countries in
exceptional circumstances, like a deep and protracted slump in
economic activity, in Chile the use of variable taxes has been
envisaged more as a fine-tuning policy scheme in which tax rates
are adjusted according to the state of the business cycle.
International Monetary Fund
|Country of origin:
Martin David Kaufman
||Electronic book text
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