When former exiles Nelson Mandela and Fernando Henrique Cardoso were elected as presidents of South Africa and Brazil in 1994, the poor and largely black majorities in both countries had good reason to be hopeful. Both men had been outspoken critics of prior authoritarian regimes, socio-economic inequality, and persistent racial discrimination in their respective countries. Democratic transitions, which paved the way for these men to take the helm of government, provided unique opportunities to steer state policy on a new course. It finally appeared as though the plight of the poor and previously disenfranchised could be improved in what had become the first and second most unequal societies on Earth.

Yet, these new presidents soon discovered that they had inherited very different states, with different capacities to govern, and in particular, to collect taxes. The South African state emerged as one of the most effective collectors of income tax in the world, and was able to collect approximately 15 percent of its gross domestic product (GDP) in the form of progressive, direct income taxes. Meanwhile, the Brazilian state could barely collect 5 percent of GDP of such revenues.