Tax Farming, Liquor, and the Quest for Fiscal Modernity in Venezuela, 1908–1935

Abstract

The transition from tax farming to the direct bureaucratic administration of taxation, long recognized as a critical phase in the formation of centralized states, has received little consideration in studies of Latin America. Analysis of this fiscal transition can yield insights into Latin American state formation by focusing attention on the political and economic interests served or undermined by these two systems of administration. In Venezuela, advocates of fiscal modernity sought to enact this transition to modernize the economy and to maximize revenue in support of state-building projects. The ruler of Venezuela during this moment, Juan Vicente Gómez (1908–1935), had to weigh these benefits of fiscal reform against the usefulness of distributing lucrative tax farming contracts as patronage to his top collaborators. This article argues that the attempt to “import” modern Western fiscal systems into Venezuela resulted in a circuitous, contingent transition, producing state structures that combined patrimonial and legal-rational practices and that thus may be characterized as neopatrimonial. The Gómez regime introduced direct administration of the liquor tax into certain regions in 1915, but liquor tax farming was eliminated only in 1931. During this transition, the central state's accumulation of expertise through direct administration led to bureaucratic refinements in the tax farming system, while patrimonial practices became intertwined with the system of direct fiscal administration. A focus on the liquor tax, then, suggests that the logic of neopatrimonial state formation in Venezuela was not driven by oil alone.