Taxation, Regulation, and the European State (EU-15)

The idea of the regulatory state in Europe 15 countries has been dominated by the premise that political and policy outcomes can be predicted by regulation. However, existing political economy literature has not taken into consideration the link between taxation, regulation, and the role of the state. In Europe, the legitimizing force in regulation has been a legal obligation based on the capacity to tax industry. For this reason, the paper critically analyzes the claim of a relationship between taxation, regulation and European nation states by considering the following question: Does the inability to tax regulated industries affect the role and legitimacy of the expansionist state? This paper hypothesizes that taxation is linked to the implementation of regulation challenging the premise that the creation of policy outcomes is a determinant for the expansionist role of the state. The findings confirm that EU 15 countries have promoted and championed the supply-side of regulation to build the capacity of the demand-side through taxation, in turn, creating legitimacy and democratization on the national level. This review expands on these findings by demonstrating taxation as the driving force in creating regulation by EU 15 countries. Furthermore, the paper suggests that the capacity to tax regulated industries is a legitimatizing force in creating regulation in EU 15 countries.