Comparative Taxation and Democratization: State Revenue Production and Democratization Revisited

39 Pages Posted: 3 Jun 2016

See all articles by Junko Kato

Junko Kato

University of Tokyo

Seiki Tanaka

University of Leeds

Date Written: May 1, 2016

Abstract

Echoing the call of "no taxation without representation", the evolution of modern taxation went hand-in-hand with early democratization. However, the study of contemporary democratization has assigned a marginal role to taxation compared with other correlates, such as economic inequality and the rent from natural resources. Comparative taxation literature indicates a divergence in tax developments along different waves of democratization. Contemporary democratizers can make use of the modern system that early democratizers developed. Under the liberalization pressure from globalized economies, they tend to adopt a modern tax (i.e., value-added tax) prior to democratization. Using an entropy-balancing method to adjust the imbalances in co-variates, quantitative analyses of panel data obtained from 160 countries between 1960 and 2007 demonstrate the positive effect of the value-added tax on democratization. Bringing taxation back in the third wave of democratization, we illuminate the fundamental premise that the taxation-democratization linkage has traveled from early to contemporary democratization.

Keywords: Taxation, VAT, democratization, international organizations, inequality

JEL Classification: D74, H23, D63, N30, N40

Suggested Citation

Kato, Junko and Tanaka, Seiki, Comparative Taxation and Democratization: State Revenue Production and Democratization Revisited (May 1, 2016). Available at SSRN: https://ssrn.com/abstract=2788479 or http://dx.doi.org/10.2139/ssrn.2788479

Junko Kato

University of Tokyo ( email )

Yayoi 1-1-1
Bunkyo-ku
Tokyo, Tokyo 113-8657
Japan

Seiki Tanaka (Contact Author)

University of Leeds ( email )

School of Politics and International Studies
Leeds, LS2 9JT
United Kingdom

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