Political Institutions, State Building, and Tax Capacity: Crossing the Tipping Point
34 Pages Posted: 20 Jan 2017
Date Written: December 2016
An empirical finding by Gaspar, Jaramillo and Wingender (2016) shows that once countries cross a tax-to-GDP threshold of around 12¾ percent, real GDP per capita increases sharply and in a sustained manner over the following decade. In this paper, we attempt via four case studies - Spain, China, Colombia, and Nigeria - to illustrate that the improvements in tax capacity have been part of a deeper process of state capacity building. We discuss the political conditions that supported tax capacity building, highlighting three important political ingredients: constitutive institutions, inclusive politics and credible leadership.
Keywords: Taxation, Spain, China, Colombia, Nigeria, Income taxes, Tax administration, Political economy, Cross country analysis, income per capita, taxation, development, institutions, political economy
JEL Classification: D70, H11, H26, O10, O43
Suggested Citation: Suggested Citation