Taxation is a major issue in economics and politics. We focus on a sample of countries which have experienced an economic and a democratic transition in Asia and Latin America for the period 1990-2004. Using a new large dataset we find that tax revenue is higher in more democratic regimes, consistently with the standard view that democracies have to satisfy the redistributive needs of the electorate. A final relationship between the level of democracy and the composition of taxes (mainly direct versus indirect) is instead much less clear to predict. A comparison with New EU members countries suggests that more mature democracies are associated with a higher level of direct taxes.
The political economy of taxation: lessons from developing countries
PROFETA, PAOLA ANTONIA;SCABROSETTI, SIMONA
2010
Abstract
Taxation is a major issue in economics and politics. We focus on a sample of countries which have experienced an economic and a democratic transition in Asia and Latin America for the period 1990-2004. Using a new large dataset we find that tax revenue is higher in more democratic regimes, consistently with the standard view that democracies have to satisfy the redistributive needs of the electorate. A final relationship between the level of democracy and the composition of taxes (mainly direct versus indirect) is instead much less clear to predict. A comparison with New EU members countries suggests that more mature democracies are associated with a higher level of direct taxes.
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