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This research aims to understand how political power influences tax collection, with a focus on VAT as a fiscal tool.

July 19, 2026European Journal of Political Research0 citations

Political power and the global expansion of the value-added tax

Key Points

This research aims to understand how political power influences tax collection, with a focus on VAT as a fiscal tool.
Analyzed a global sample of democracies from 1990 to 2020.
Utilized insights from political economy literature to test the impact of legislative support on VAT revenues.
Focused on variations in developing countries where VAT plays a crucial role in revenue.
Governments with strong legislative support raised significantly more VAT revenues.
The effect was stronger in developing countries, which heavily rely on VAT for public revenues.
Findings highlight the importance of domestic political dynamics in tax revenue generation.

Abstract

Abstract How does political power shape tax collection? This article addresses this question by focusing on the most prominent fiscal phenomenon of the recent decades – the rise of the value-added tax (VAT). Drawing on insights from the political economy literature, I test the argument that governments with strong legislative support raise more revenues from the VAT as an effective tool to improve public finances in the short term. Results from a global sample of democracies between 1990 and 2020 provide support for this argument. The effect is particularly pronounced among developing countries, where the VAT is often the tax type that accounts for the largest share of public revenues. These findings illustrate the role of domestic political dynamics in shaping the rise of the VAT to its status as a primary revenue source for the modern tax state.

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