Tax collectors know that “old taxes are good taxes”. But are “old regimes” at the same time “good tax collectors”? Stable expectations, reliable polities and capable public administrations are important factors of economic growth and a well-functioning tax system. But what exactly is the role of regime stability with regard to revenue mobilisation? While the theoretical literature provides alternative explanations pointing towards diverging outcomes, empirical evidence remains scant.
This paper studies the effects of regime durability on taxation, covering 132 countries between 1990 and 2008. Findings show that regime durability has a positive impact on taxation, independently of regime type. Exploring non-linear trends, we find evidence that the effect of regime durability on taxation levels off only after several decades. This appears to be in line with arguments pointing towards the detrimental (short-run) effects of regime transitions on state capacity, and the positive long-term effects of stable expectations.
