Imposing higher taxes on citizens is positively linked to how well the public authorities and institutions in that country work, says a study based on analysis of statistics for taxation and governance from most of the world’s countries.
The reason is that any ruler who wants to collect taxes must build a well-functioning bureaucracy and give the taxed something in return, in the shape of welfare reforms and some influence over how the taxes are handled, explained study author Rasmus Broms from University of Gothenburg in Sweden in an official statement.
No one has ever liked having to let go of their hard-earned money. If one is to do that, one both wants to get something in return, but perhaps above all get some kind of influence over how the tax money is used, Broms said.
The ruler also needs to build a well-functioning and quite a complicated machinery to collect the taxes. Historically, this has often been the initiator of a country’s public administration.
Both these aspects push for a more transparent and effective social system, according to Broms.
To a great extent, the French and American revolutions concerned taxes, and much of what we today view as the modern state has its foundation in the systems that were built after these revolutions, Broms argued.
The study also showed that in Africa, people who pay taxes are more politically interested than those who do not pay taxes.
In a little longer term, it is better for a state to introduce widely collected tax bases that are noticed among the public, than to look for incomes by for example high trade tariffs, Broms said.