Aid for Taxation and Representation? An Analysis of Tax Assistance on Democracy

• In Event: The Domestic and International Political Economy of Aid

Abstract

For decades, scholars have been assessing the complex relationship between taxation and representation (Bates and Lien 1985, Levi 1988, Ross 2004, Boucoyannis 2015). Yet, the theoretical logic remains in debate and the empirical evidence is mixed. In this analysis, we approach the taxation-representation question through an innovative, unique lens: foreign aid given to assist with tax collection. This tax aid is essentially an exogenous shock to tax capacity that can be leveraged to assess how such a change impacts democracy. Our two stage least squares empirical estimations of Aiddata and World Bank datasets of tax aid on various measures of democracy (Boix et al 2013, Vdem) and democratic participation (World Values Survey) indicate that countries receiving tax aid see an improvement in democracy and increased voting and protest activity. However, the survey data highlights that tax aid is not associated with greater confidence in government. The evidence thus suggests that citizens- facing more stringent tax compliance enforcement and yet unchanged service provision- are expressing their continued dissatisfaction through the democratic process. Our findings also contribute to our understanding of the political aid curse and how tax aid is less likely to contribute to autocratic rule or survival.

Authors

• Ida Bastiaens, Fordham University

• Laura Seelkopf, European University Institute