The Political Economy of Taxation

The Political Economy of Taxation

Lessons from Developing Countries

Paola Profeta and Simona Scabrosetti

This unique book in a relatively under-researched subject area will prove essential reading for academics, researchers and practitioners focusing on political economy, public finance and the economics of taxation.

Chapter 6: Asia, Latin America and New EU Members Countries

Paola Profeta and Simona Scabrosetti

Subjects: economics and finance, political economy, public finance, public sector economics, politics and public policy, political economy


6. 6.1 Asia, Latin America and new EU member countries INTRODUCTION This chapter reconsiders our two focus areas, Asia and Latin America, in a comparative perspective, having as a benchmark the new EU member countries that joined the European Union in 2004: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.1 Obviously, we are aware that each area presents its own history, background and institutional, economic and social characteristics which make comparisons very hard. However, we think that, with the necessary caution, some interesting insights may be drawn from jointly considering these transition areas. In particular, we consider this comparative perspective useful in shedding additional light on the relation between democracy and taxation in our two focus areas. In fact, the new EU member countries have all experienced a transition from a centrally planned to a market economy, they have become democratic and they have successfully implemented tax reforms during the transition period. According to the EBRD Transition Report (1999), central and eastern European countries, such as Hungary, Poland, the Czech Republic and Slovenia, have been the most successful in the transition, followed by Estonia and the Baltic states. Tax reforms are at the core of this good transition, although these countries are still experiencing some difficulties with the functioning of their new tax systems, mainly related to tax administration. What has determined this positive transition experience? And how can the governments address the remaining problems? We argue that political factors may play a crucial role. In...

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