Political Regimes and Taxation

Abstract:     
A growing body of literature in social science suggests that governance matters in determining tax performance. However, the relationship of political regimes to tax performance still remains under-explored. To what extent does the authoritarian or democratic character of the polity impact on the level of taxation? What role does political stability play? Recent political events in the Middle East and North Africa (MENA) region underscore the importance of studying the effect of these variables on tax performance.

The paper investigates the impact of political regimes on tax performance, using a panel dataset of 193 countries and covering the period 1990-2008. Findings suggest a positive correlation between regime durability and tax collection, regardless of regime type. At the same time, the character of the polity clearly influences taxation, but there is no linear trend in favor of democratization. Rather, the results indicate a U-shaped relationship between polity and tax ratio.

Number of Pages in PDF File: 25

Keywords: Political regime, Democracy, Regime durability, Taxation, Tax ratio

working papers series