Fiscal State Research Articles

The Origins of a Fiscal Outlier: The Abandonment of a Federal VAT in the Nixon Presidency

Abstract Richard Nixon was the first president who examined the possibility of introducing a value-added tax (VAT) at the federal level in the late twentieth century. By 1970, his administration had considered recommending it alongside other domestic programs to overcome the criticism against the VAT’s regressivity, potential conflict in the federal–state tax authority, and the fragmented decision-making authority between the executive and legislative branches of the government. However, in 1971, the Nixon administration shifted their policy priority toward gaining the middle-class political support by linking local property tax relief to a federal VAT. Although they combined the two measures with a rebate to obtain consent to and confidence in them from the “opponents” among the “internalists” of policymaking and societal actors, their attempt failed to accomplish it. As a result, Nixon abandoned the federal VAT. This abandonment was a missed opportunity to introduce a federal VAT, leading the United States to become a fiscal outlier among Organisation for Economic Co-operation and Development (OECD) countries: it has not yet implemented a national/federal VAT. Furthermore, this outcome marked the origin of certain historical characteristics of the American fiscal state: the use of tax expenditures, “fend-for-yourself federalism,” weak extractive capacity, and fiscal inflexibility.

French Imperial Statecraft, Capital, Corporate Taxation, and the Tax Haven that Wasn’t, 1920s–1950s

Abstract Towards the mid-1920s, a growing number of colonial firms began to transfer their headquarters from the metropole to French colonies to evade taxation on investment capital income. These transfers threatened to transform French colonies into tax havens. Why was this averted? This article explores the politics of corporate tax planning in the French colonial empire and shows that French colonial tax havens could have materialized on a large scale at two critical junctures: first in the inter-war period and then in the aftermath of the Second World War. It argues that they eventually did not come into being because successive administrations within the French Ministry of Finance did not let it happen. Broader structural determinants — the relative weakness of the French metropolitan fiscal state in the inter-war period and the unwillingness to let international capital dictate French development strategies in the late colonial period — crucially influenced the positions taken by the Ministry of Finance. Post-war dreams of restored grandeur made French authorities much more reluctant to outsource development and let go of state prerogatives. This unrealized possibility sheds light on the role of state power in the making and unmaking of tax havens and contributes to a fast-expanding historiography.

The €13bn Question: Is The Fiscal State Aid Era Over?

The €13bn Question: Is The Fiscal State Aid Era Over?

The influence of fiscal factors on the sustainability of the regional economy development

Over the past few decades, the economy of the Republic of Kazakhstan has been gradually but steadily growing. Progress is primarily associated with the develop- ment of fiscal state policy, which contributes to an increase in the value of the gross domestic product (GDP) per capita. It significantly improves competitiveness in the world market, prevents inflation, as well as other factors destabilising the national economy. The large-scale export of energy and mineral resources contributes to the positive balance of international trade of the Republic of Kazakhstan, but in the long term, it is likely a threat to the development of its innovative potential, primarily due to the low level of economic diversification. The aim of this study is to analyse the development of the fiscal policy of the Republic of Kazakhstan and the factors of its influence on the economic competitiveness of the country. The study uses analysis, synthesis, and subsequent comparison of various statistical indicators of the Kazakh- stani economy with the leading world economies. Based on the results of the study, an urgent need was established to focus on expanding the innovation fund with the subsequent development of an innovation strategy. It is one of the most effective mechanisms to ensure intensive growth of national economy, expanding its market potential and increasing economic diversification to a safe level. This task requires, first of all, increased funding for research and development (R&D) of innovations. The paper will be useful to researchers and specialists in the field of economics for forecasting and analysing its further development in the Republic of Kazakhstan.

Social Assistance and Social Development: regression of social assistance rights?

The Social Development as a broader field than Social Assistance policy, in this case reduced to the condition of guardianship action, has been an issue that is persistently present in the neoliberal orientation. The issue was present in debates during the transition process of the new Government Luís Inácio Lula da Silva (2023-2025), which sought to build a model of concertation aimed at democratic restoration. Governments from 2016-2022 removed the status of the State as guarantor of social rights. They illusorily presented the logic of offering emancipation and citizenship through insertion into work, in a context of high unemployment and an increase in social disprotections. Social protection policies were rejected, deprived of resources, social participation, and inter-federal coordination. It is the duty of the Social State and the Fiscal State to rescue and strengthen the Unified Social Assistance System and guarantee constitutional rights. This text aims to stress the understanding of the elements that distinguish the direction of social development from social assistance policy, understanding that they are neither synonyms nor antonyms. Historical and analytical arguments are brought about such understanding, situating current and future challenges for SUAS.

Salt of the Empire: the making of an Ottoman monopoly, 1838–1881

AbstractThe present article is a study of the fiscal history of the Ottoman salt monopoly before 1881, when it was taken over by local and European creditors. It brings a novel perspective to the literature on Ottoman finances by highlighting a case of centralized collection of an indirect tax. It argues that the interplay between the government’s urge to raise indirect contributions and the consumers’ proclivity to illicit salt determined the enterprise’s sustainability. Not merely a security for European credit, the salt monopoly was a genuine Ottoman institution in the transformation to a modern fiscal state.

A Structure/Process Approach to Legitimacy: A Local Official's Selection and Legitimation of a Tax Policy in Mid‐Late Ming Dynasty China

AbstractMost studies on the connection between the legitimacy of an authority and its policy selection and legitimation follow a structure approach to legitimacy, which recognises an authoritative actor's selection and legitimation of a policy as determined by the subjects' collective commitment to values. Consequently, it cannot empirically explain policy variation under collective commitment to values and changes in those values. Building on existing processual theories and following the conceptualisation of legitimacy as a social process, this study proposes an integral process approach to legitimacy whereby an authority selects and legitimises a perceived legitimate policy towards subjects. Drawing on findings from a negative case methodology applied to the selection and legitimation of a tax policy by an official in Ming China, this study offers substantive content for an integral process approach to legitimacy. It develops the state legitimacy concept and contributes to emerging theories on the legitimacy dimension of fiscal state formation. Empirically, this study illustrates how the data from the nationwide field survey in mid‐late Ming China were used in tax collection at the local level and illuminates the discrepancies between the survey data and that recorded in local official tax registers.

No taxation without informational foundation: on the role of legibility in tax state development

AbstractThis article combines cross-national statistical analysis and in-depth historical case studies of Argentina and Chile to explore the relationship between two crucial dimensions of state capacity. We show that information capacity contributes to the development of fiscal capacity. When states have accurate information about their subject populations, territories, and economies, they are more effective at mobilizing revenues. In developing this argument this article makes three broader contributions. First, while existing scholarship either treats distinct dimensions of state capacity as separate entities, or simply assumes that they complement each other, our findings urge scholars to treat state development as sequential and to further investigate how multiple dimensions of state capacity are interrelated. Second, the paper suggests a broader underlying set of mechanisms – economies of scope – which connect these dimensions, and explores them in the specific context of how information capacity facilitates fiscal capacity. Third, we join the scholarship on the importance of societal compliance in the creation of the fiscal state, but with a focus on elite cooperation with the state's information collection efforts, which we show to be crucial to tax state development.

Analytical Study of GST (Goods and Service Tax) with Reference to Madhya Pradesh

This paper describes the significant role of GST in Madhya Pradesh fiscal state, revenue collection with transparency and smooth functioning of GST. It also covers the recent growth of GST as well as its impact on households. It explains uniformity in tax structure and convenient procedure of getting registration in GST.

Chronological changes of government sectors’ fiscal policies and fiscal sustainability in Japan

Since the end of the 1990 s, the sluggish growth of Japan’s gross domestic product (GDP) and the mired fiscal state of its public sector have provoked consternation about its public sector’s fiscal sustainability. Therefore, I estimated the fiscal reaction functions (stemming from Bohn, 1998a, 2008) with time-varying parameters for all Japan’s government sectors (for 1976Q2–2020Q1), i.e., the general government (GG), the central government (CG), the whole of the local governments (WLG), and the whole of the social security funds (WSSF), to chronologically assess their fiscal sustainability using four different models, including a least-squares with breakpoints model and a state-space model with the Kalman filter. My results demonstrate that (1) the least-squares with breakpoints model outperformed the others, and (2) although CG, WLG, and WSSF often sustainably managed their finances during the analysis term, GG has failed to implement a sustainable fiscal policy from the mid-1990 s (3) CG and WSSF adjusted their fiscal postures according to Japan’s economic state. Fiscal severity caused WLG to change its fiscal posture.

Conceptualizing the fiscal state: implications for sub-Saharan Africa

Abstract This paper contributes to the debate on domestic revenue mobilization and state-building in the Global South by exploring the concept of fiscal states and the common assumption that such states are present in sub-Saharan Africa. We systematically review the diverse understandings of the fiscal state across relevant literatures to revisit its conceptualization. On that basis, we define the fiscal state as a state whose public revenue base is dominated by tax revenue and loans, and where the relationship between taxation and external and domestic borrowing is balanced and thereby sustainable and characterized by interdependence. We distinguish the fiscal state conceptually from the tax, debt, and rentier states and present a typology of these ideal state types, discussing illustrative empirical examples of different states in sub-Saharan Africa. These illustrate that not all sub-Saharan states can be categorized as fiscal states. This is important because when African states are regarded as fiscal states, assumptions are made about their economic structures; yet, to the extent that these are absent, fiscal policy reforms are unlikely to carry long-term positive effects.

Tax Without Law: Book Review of Wei Cui, The Administrative Foundations of the Chinese Fiscal State

Tax Without Law: Book Review of Wei Cui, The Administrative Foundations of the Chinese Fiscal State

The Fiscal State in Africa: Evidence from a Century of Growth

AbstractWhat is the level of state capacity in developing countries today, and what have been its drivers over the past century? We construct a comprehensive new data set of tax and revenue collection for forty-six African polities from 1900 to 2015. Our data show that polities in Africa have been characterized by strong growth in fiscal capacity on average, but that substantial heterogeneity exists. The empirical analysis reveals that canonical state-building factors such as democratic institutions and interstate warfare have limited power to explain these divergent growth paths. On the other hand, accounting for the relationship between African polities and the international environment—through the availability of external finance and the legacy of colonialism—is key to understanding their differing investments in fiscal capacity. These insights add important nuances to established theories of state building. Not only can the availability of external finance deter investment in fiscal capacity, but it also moderates the efficacy of canonical state-building factors.

Fiscal state aid law as a tool against harmful tax competition in the EU: déjà vu?

Abstract The theme of this article is the relationship between harmful tax competition measures and prohibited fiscal State aid. The aim of this article is to present a targeted examination of the use of State aid rules against national tax measures, eg tax schemes and tax rulings, following the adoption of the EU Code of Conduct for Business Taxation in 1997. The fiscal State aid decisions and judgments to be covered are divided into two parts: the first fiscal aid wave of the (early) 2000s and the second (ongoing) fiscal aid wave, which most notably includes the Apple, Fiat, Starbucks, and Amazon cases. It is argued that an important factor connecting the two fiscal State aid waves is the link they share with the EU’s fight against harmful tax competition.

Experts, Democracy, and the Historical Irony of U.S. Tax Policy: Thomas S. Adams and the Beginnings of the Value-Added Tax

In the early 1920s, legal and economic experts in the U.S. Treasury Department played a pivotal role in developing U.S. fiscal policy. Thomas S. Adams was one such expert and a key architect of the World War I fiscal state. After the war, Adams envisioned an innovative business tax that could have been the first broad-based, national consumption tax in the United States but was rejected by populist lawmakers. Later, Adams would be identified as one of the intellectual pioneers of the modern value-added tax (VAT)—a tax that has been adopted in nearly every developed country in the world except the United States and has also come to underwrite expansive, progressive social-welfare spending. How did a tax that began with an American expert fail to take hold in the United States? Democratic forces in the shape of organized political and economic interests both facilitated and frustrated the development of seemingly rational tax laws and spending policies crafted by fiscal experts. While Adams learned firsthand how these democratic forces influenced the relationship between expertise and state capacity, this missed opportunity to enact a comprehensive national consumption tax also influenced the peculiar development of the modern American fiscal and social-welfare states.

Article: Analysis of the (In)compatibility of Digital Services Taxes With State Aid Rules

After the recent agreements at a global level, some Member States of the European Union have paused their plans for Digital Services Taxes. However, others have decided to move forward with them as the global political agreement reached, while encouraging, has not been implemented yet. Therefore, it is still relevant to understand the nature of such taxes and, more importantly in the context of the EU, their possible (in)compatibility with state aid rules. The purpose of this article is to shed light into these measures in a manner that encompasses all possible taxes. To establish the possible incompatibility of the taxes, an analysis is made passing through all the conditions for a measure to be considered as state aid and giving particular importance to the notion of selective advantage, which will be the determining factor if the Court of Justice of the European Union (CJEU) ever must pronounce itself on this matter. Digital Services Taxes, State aid, Fiscal State aid, Selective Advantage, European Union, European Commission, Court of Justice of the European Union, Unilateral measures, OECD

Two Sides of the Same Coin: Direct Taxation and Negotiated Governance in Colonial Indonesia

Abstract This article investigates the implementation of direct taxes in colonial Indonesia between roughly 1870 and 1930, to widen our understanding of colonial governance and fiscal state building. It examines the various connotations given to taxation by colonial politicians and statesmen, and elucidates how these were developed and experienced rather differently in practice. Taxes became rooted in local patterns of customary law, indirect rule, and constant negotiation between colonial officials, local indigenous rulers, and subjected taxpayers. This demonstrates that local, colonial institutions did not have the weight and capacity state officials claimed they had, and that in colonial context, bottom-up practices of negotiated governance and consultation, that deliberately ignored the rules of fiscal bureaucracy imposed from above, were pivotal to taxation.

Taxation, Property Rights and Fiscal State: The Historical Analyses of China In Capital and Ideology

AbstractThe widely acclaimed Capital and Ideology, though an important contribution to the inequality debates, is limited by its use of secondary sources and fiscal state framework in its historical analysis of China. Its arguments for a Confucian trifunctional society with property rights sacralized by nobles’ and scholars’ regalian functions, and persistently low and stagnant taxation in premodern China overly simplify the historical reality. Using primary Chinese sources, this article highlights the major oversimplifications. The information and issues presented here are also worth considering for similar social and fiscal studies of premodern China.

Can Facebook Ads and Email Messages Increase Fiscal Capacity? Experimental Evidence from Venezuela

Tax compliance is a big challenge in weakly institutionalized countries, in which citizens do not trust the State and prefer to evade. Can compliance be increased, and hence fiscal state capacity strengthened, using online strategies? We perform a randomized field experiment in Venezuela's capital, Caracas, to determine if email messages, Facebook ads, or a combination of both, can increase tax compliance. By varying the mechanism used to approach taxpayers, we are able to test if more direct and personalized methods, such as email messages, are more effective than general advertisement tools, such as Facebook ads. Moreover, our design allows us to test if both strategies complement each other and boost the capacity of a local government to increase compliance. Preliminary results suggest that these strategies are cost-effective methods for increasing tax revenues, even in a context of low confidence in the State, as is the case of Venezuela nowadays.

Tax policy in the UK post-Brexit

Abstract Tax matters figured prominently in the Brexit debate. Current signs are, however, that the UK government is not planning the creation of a post-Brexit ‘Singapore on Thames’ as some had predicted. In fact, we are seeing increases to the main corporation tax rate in response to broader international tax developments and the fiscal upheaval caused by the pandemic. Prior to Brexit, the UK already enjoyed considerable freedom in respect of direct taxes including income tax and corporation tax, but less so for VAT; it has more freedom to change the VAT now, if desired, and has already introduced some relatively small amendments to reflect the new state of play. At this point, the government has exercised its new-found freedoms on tax in quite limited ways—most notably in creating freeports which will benefit from special advantageous customs and tax rules, refocusing R&D tax relief towards activity conducted in the UK, making relatively minor changes to tonnage tax, alcohol duties, and air passenger duty, and removing some narrow EU-focused corporation tax measures. However, these new-found tax freedoms come with new-found restrictions, costs, and challenges for both taxpayers and the UK government. There are significant changes on the tax administration front, which generally complicates matters for HMRC as it will have to rely on less extensive and less convenient treaty and OECD avenues of cooperation. On VAT, teething issues as well as longer-term complications have arisen post-Brexit for businesses and consumers. Provisions remain to control the extent of fiscal state aid, albeit in a less restrictive way under the new subsidy control mechanism in the UK/EU Trade and Co-operation Agreement. The strong overall message is that financial and international pressures and constraints are more important to the direction of tax policy than the fact that the UK has left the EU.