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Tax Politics in Eastern Europe

Globalization, Regional Integration, and the Democratic Compromise

Hilary Appel

Publication Year: 2011

“This is the first book to systematically examine the variation in policies of Eastern European countries. There is a theoretical contribution to understandings of variation in tax policies, but just as impressive is the in-depth empirical analysis and in particular the data from interviews with key players in the process.” —Yoshiko Herrera, University of Wisconsin-Madison Post-Communist tax reform, like institutional reform in other areas of the post-Communist transition, holds tremendous material consequences for different groups in society. Consequently, one would expect the allocation of resources and the distribution of the financial burden of that allocation to be highly sensitive to domestic politics. Indeed the political stakes should be especially high since post-Communist tax reform requires not merely a simple adjustment at the margin, but the fundamental reallocation of the responsibility for government revenue. In Eastern Europe, however, important areas of tax policy do not reflect traditional domestic variables (e.g., interest groups and partisanship) so much as the international imperatives associated with regional and global economic integration. In Tax Politics in Eastern Europe, Hilary Appel analyzes the domestic and international factors that drive tax policy. She begins with a review of the greatest challenges in the initial creation of the capitalist tax systems in former Communist states and then turns to the evolution of specific forms of taxation in order to gauge the relative impact of domestic politics on tax policy. Appel concludes that, although some tax areas, such as personal income taxes, remain politicized, most other taxes, such as corporate income taxes and all forms of consumption taxes, have been less subject to domestic political pressures because of powerful constraints resulting from regional and global economic integration.

Published by: University of Michigan Press

Contents

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pp. v-

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Acknowledgments

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pp. vii-viii

I am grateful to many individuals and institutions for their support of this project. This book could not have been written without the generous funding of the National Council of Eurasian and East European Research and the Kennan Institute at the Woodrow Wilson International Center for Scholars. I would like to thank these organizations as well as the Keck Center for...

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Chapter 1: The Decline of Tax Politics in Eastern Europe

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pp. 1-18

After the collapse of the communist regimes in Eastern Europe and the abandonment of the command economy system, newly elected leaders had to create the basic institutions of a capitalist tax system. Within this process a staggering number of profound policy choices had to be made within a short period of time. Public officials had to decide, for instance, which sectors of the...

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Chapter 2: Creating a Capitalist Tax Structure after Communism

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pp. 19-41

Even in the best of times, extracting resources from a population has eluded leaders who aspire to increase revenue. In the Soviet era, leaders in communist regimes managed to extract revenue by closely controlling all formal economic activity. Collecting taxes was an administrative task within the overarching structure of (near total) state control of the economy. Garnering taxes...

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Chapter 3: Ceding Control: European Integration and Consumption Taxes

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pp. 42-59

As the postcommunist governments began to devise their tax systems in ways that were compatible with and supportive of their democratic and capitalist transformations, they paid close attention to the tax forms in Western Europe.In part, the East Europeans were searching for solutions to fiscal problems.They also, however, began quickly to fuse their domestic economic...

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Chapter 4: The Race to the Bottom? Corporate Taxes and the Competition for Capital

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pp. 60-83

European economic integration has required leaders in Eastern Europe to adopt a specific consumption tax regime. It has also generated pressures and constraints on how governments tax corporations. The competition for investment within Europe, when combined with restrictions posed by European law, has limited the flexibility of leaders in taxing the business sector. As a...

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Chapter 5: Politics and Personal Income Taxes

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pp. 84-116

Thus far this book tells a story in which domestic political logics do not seem to matter much for taxation. Consumption taxes, even if they irritate or offend the public at times, are beyond political bargaining in most East European polities due to the way EU accession and membership have been managed.Furthermore, the shift away from corporate responsibility for tax revenues is...

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Chapter 6: Politics and Taxation in Russia: The Case of an Oil Economy

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pp. 117-142

Does taxation politics in Russia conform to the general pattern of taxation politics in Eastern Europe? What similarities are there between the development of the Russian tax system and those in postcommunist Europe? To what extent do external pressures constrain Russian tax policy given Russia’s size and the structure of its economy? Is the geopolitical status of Russia or the size...

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Chapter 7: Globalization, Electoral Politics, and European Taxation

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pp. 143-155

The myriad external constraints that discourage East European governments from responding to domestic constituents when setting certain tax policies seem much less binding for Russia’s governments. An important lesson learned from the comparison of the tax experiences in Eastern Europe and Russia is that any broad statements about the impact of international...

Notes

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pp. 157-166

Bibliography

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pp. 167-181

Index

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pp. 183-189


E-ISBN-13: 9780472027514
E-ISBN-10: 0472027514
Print-ISBN-13: 9780472117765
Print-ISBN-10: 0472117769

Page Count: 216
Illustrations: 7 Figures, 14 Tables
Publication Year: 2011

Research Areas

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Subject Headings

  • Europe, Eastern -- Politics and government.
  • Europe, Eastern -- Economic integration.
  • Taxation -- Europe, Eastern.
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