From Tariffs to Taxes: A Comparison of Europe and Latin America

One of the most important events in the development of the modern state was the shift from customs and excise duties to a broader base of more efficient internal sources of revenue (such as taxes on property, income, and consumption).  But we still know little about the political underpinnings of this shift, since most comparative studies are concerned with a small number of countries, particularly in Western Europe.  This paper combines new datasets on political regimes, taxes, tariffs, and government ideology from the 1870s to the 1990s to examine the political underpinnings of the shift from tariffs to taxes, with an emphasis on the comparison between the European and the Latin American historical experiences. We argue that the successful expansion of fiscal capacity was contingent on the state's ability to generate sufficient custom revenues early on as well as its ability to suppress the political influence of groups with protectionist interests in later stages.