The making of problematic tax regulation: A Bourdieusian perspective

The implementation of thorny or problematic regulation is challenging for both regulators and regulatees. The reasons for the existence of problematic regulation are not to be found in the regulation itself, but rather in the policy-making process that creates it. This paper examines the process by which a problematic tax rule, the transfer pricing rule, was created in Chile in 1997. Based empirically on documents and semi-structured interviews with relevant elite rule-makers and other informants, and theoretically inspired by Bourdieusian concepts, this paper illustrates how powerful rule-makers in various spheres of activity confront each other in the definition of the final content of the rule. On the one hand, how bureaucratic, professional and scholarly rule-makers drafted the bill of law depended on their relevant technical capital, administrative capacity, and political concern that the rule would make it through the parliamentary process in the hands of political adversaries. On the other hand, this paper shows that once the rule entered the political sphere, political adversaries’ views about the role of the State, the mobilisation of silence and other explicit techniques were used to curtail the State’s power. Eventually, these power struggles gave rise to a problematic tax regulation. This paper broadly illustrates the role of powerful agents in favouring or constraining the creation of fairer tax systems and the factual operation of democracy and politics.