The effect of political cohesion on taxation in developing democracies
P12-S297-2
Presented by: Guy Heilbrun
How does political power shape tax collection? While the relationship between regime type and taxation has been widely studied, little is known about the impact of political strength on fiscal capacity within democracies. This article addresses this question by examining how the legislative power of governments in developing democracies affects the level and structure of tax revenues. Drawing on Levi (1989) 'theory of predatory rule', I test the hypotheses that an increase in the government's legislative support leads to higher tax revenues and that the effect varies by tax type. Specifically, I posit that governments with a dominant position in the legislature focus on increasing revenues from the value-added tax due to cost-benefit considerations. Employing fixed effects regression models and matching with difference-in-differences, the results provide strong support for the second hypothesis and partial support for the first hypothesis. These findings illustrate the importance of executive-legislative cohesion in explaining variation in the fiscal performance of contemporary developing democracies.
Keywords: political economy, comparative politics, government, taxation, democracy