Guy Heilbrun (King’s Coll. London, Dept. Pol. Econ.), Political Power and the Global Expansion of the Value-Added Tax, Eur. J. Pol. Rsch. (forthcoming 2026):
How does political power shape tax collection? This article addresses this question by focusing on the most prominent [international] 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.
From the conclusion:
These findings improve our knowledge and understanding of the rise of the VAT. They suggest that apart from being a product of factors such as fiscal modernisation, fiscal pressure, and trade liberalisation, the global expansion of this tax has also been driven by domestic political dynamics. Furthermore, the article enhances our understanding of the democracy-taxation nexus. Whereas previous research has focused on the broader relationship between political regimes and tax revenues, it shows that variation in political power within democracies matters for fiscal outcomes. Finally, . . . the findings underscore the importance of the political arena for our understanding of the evolution of tax systems in developing countries. One potential implication of this research therefore is that greater attention should be given to the domestic political landscape in the design, planning, and analysis of tax reforms . . . .
