TY - JOUR

T1 - Trade liberalization and the global expansion of modern taxes

AU - Seelkopf, Laura

AU - Lierse, Hanna

AU - Schmitt, Carina

PY - 2016/3/3

Y1 - 2016/3/3

N2 - For a long time, governments relied heavily on trade taxes as the main source of public finance, and for some countries, mainly less developed ones, they still account for a large share of revenue. Yet, with trade liberalization, governments have been forced to abandon these easy-to-collect taxes and to adopt modern hard-to-collect taxes, mainly internal income and consumption taxes. Surprisingly, we know little about how governments across the world have addressed this common challenge. In this paper, we analyze the rise of the most important present taxes: the personal and corporate income tax, the general sales tax and the value-added tax. Based on a self-coded dataset, we provide a historical-descriptive outline of the expansion of modern taxes since 1842 and test the effect of trade liberalization on the probability to adopt hard(er)-to-collect taxes. While trade is an important determinant for the legislation of modern taxes, we find that its influence is not universal but depends on the tax type. Only the personal income tax and the value-added tax have served as a revenue substitution to trade taxes, while the general sales tax and the corporate income tax were rather fueled by other factors such as spending pressures.

AB - For a long time, governments relied heavily on trade taxes as the main source of public finance, and for some countries, mainly less developed ones, they still account for a large share of revenue. Yet, with trade liberalization, governments have been forced to abandon these easy-to-collect taxes and to adopt modern hard-to-collect taxes, mainly internal income and consumption taxes. Surprisingly, we know little about how governments across the world have addressed this common challenge. In this paper, we analyze the rise of the most important present taxes: the personal and corporate income tax, the general sales tax and the value-added tax. Based on a self-coded dataset, we provide a historical-descriptive outline of the expansion of modern taxes since 1842 and test the effect of trade liberalization on the probability to adopt hard(er)-to-collect taxes. While trade is an important determinant for the legislation of modern taxes, we find that its influence is not universal but depends on the tax type. Only the personal income tax and the value-added tax have served as a revenue substitution to trade taxes, while the general sales tax and the corporate income tax were rather fueled by other factors such as spending pressures.

KW - consumption taxes

KW - globalization

KW - income taxes

KW - tax adoption

KW - taxation

KW - trade liberalization

KW - Sustainability sciences, Management & Economics

UR - http://www.scopus.com/inward/record.url?scp=84955082211&partnerID=8YFLogxK

U2 - 10.1080/09692290.2015.1125937

DO - 10.1080/09692290.2015.1125937

M3 - Journal articles

AN - SCOPUS:84955082211

VL - 23

SP - 208

EP - 231

JO - Review of International Political Economy

JF - Review of International Political Economy

SN - 0969-2290

IS - 2

ER -