Taxation and Redistribution in Autocratic Regimes

Taxation is one of the core functions of the nation state. Next to being the biggest source of government revenue, taxes are also powerful policy instruments for income redistribution, particularly the income tax, which is one of the most progressive taxes. Its beginnings as a major tax instrument took place in democratizing Britain in 1842, where the newly enfranchised group of the lower income strata called for an income tax to satisfy their demands for more redistributive justice. This observation is in line with some authors who have argued that democracies are more likely to redistribute between the poor and the rich as they are more responsive to majoritarian preferences than authoritarian regimes. Yet, other scholars have claimed that autocracies are more likely to adopt progressive taxes than democracies so that the political elites can secure their power without having to democratize. In this paper, we compare the adoption of two direct taxes, the personal and the corporate income tax, and two indirect ones, the sales and the value added tax, across autocratic and democratic regimes. As they differ in terms of their redistributive nature with income generally being more progressive than consumption taxes, we can test to what extent democratic or autocratic regimes are more likely to adopt redistributive forms of taxation. Based on a self-coded global dataset of up to 150 countries, we illustrate how the spread of the tax state varies between autocratic and democratic countries in the world. Following a historical-descriptive outline, we provide a systematic analysis of how regime type drives the proliferation of the four taxes around the world. The evidence shows democracies have a positive effect on the adoption of progressive (direct) and an insignificant one on regressive (indirect) taxes.