Abstract
This chapter compares the evolution of fiscal systems in Andean and Nordic countries between 1850 and 2010. It does so through the lens of the “fiscal contract”: because tax revenues are in some degree voluntary, citizens who pay them would expect state services in return, and have incentives and leverage to fiscalise the use of public funds. The structure of payments could therefore impact both the direction and efficiency of state spending. We argue that Norway and Sweden developed universal fiscal contracts, while narrow ones emerged in Bolivia, Chile, and Peru. This would be consistent with higher, if unstable, use of revenues from natural resources in the Andean countries—a type of revenue which is normally relatively easy to administer, and requires bargaining with few localised agents (Peres-Cajías et al., in Resource abundance and public finances in five peripheral economies, 1850–1939, 2020). We illustrate the emergence of these different fiscal contracts through the timing and nature of four tax transitions: the repeal of the Ancien Régime taxes and their replacement with liberal ones, the decline of trade taxes, the expansion of income taxation, and finally the appearance of general consumption taxes. Through the chapter, the emphasis is on the introduction and development of modern, broad-based forms of taxation, that require greater administrative capacity, and voluntary compliance.
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Notes
- 1.
According to Lledo et al. (2004: 8–10), there are three different ways to understand the relationship between society and state through the study of taxation. First, the societal approach analyses public finances in terms of interest clashes and the evolution that results from them: it focuses in how social conflict determines tax and public spending structures. Secondly, the institutional approach qualifies somewhat the relative importance of each actor and stresses that institutions, depending on how they are erected, allow skewing the outcome of conflict interests. Third, the political development approach is more concerned in how the social contract between society and the state can be improved.
- 2.
Revenues from oil have represented an average of 17% of total revenues of the Norwegian state in the period 1972–2017, attaining maximum levels of over 30% for some years of the early twentieth first century (authors’ calculations with data from Eitrheim & Fevolden, 2019). According to data from the Ministry of Finance, an average of 65% of net state revenues from the oil sector have come from taxes in the period 1976–2018.
- 3.
Services are centrally regulated, also covered by grants and equalization schemes between regions, and income taxes have been homogenized over time (for example with national governments setting limits on the minimum and maximum rates). See Borge and Rattsø (1997) on the case of Norway.
- 4.
The “long nineteenth century” refers to the years between the French Revolution and the First World War; it is a commonly used concept introduced by the British historian Eric Hobsbawm with his trilogy of books about this period.
- 5.
Yun-Casalilla et al. (2012) suggests the existence of similar dynamics in several European countries already during the eighteenth century, relating the increased reliance on international trade taxes and monopolies with more infrequent use of currency debasements, which would hurt the mercantile class.
- 6.
Note the use of the expression possible basis. Taxation can also be understood as extraction, where the taxpayer has little to say about the use of the funds. The essential point is that for a fiscal contract to arise, compliance has to be to a certain extent voluntary (Levi, 1988).
- 7.
These were the grundskatt (disappeared between 1893 and 1903) and the rustnings- och roteringsbesvären (which were partially paid directly into military budgets); see Gårestad (1985).
- 8.
The Sami population was exempted from paying mantalspenningar, as well as the poor and the military; women paid half the amount (Schön, 2010).
- 9.
Contrary to the modern methods of tax assessment, where the payment results from applying a given rate to the pre-established tax base.
- 10.
Approximately a third of the tax revenue of municipalities was based on income and wealth taxes in 1851; this share had gone up to 50% by 1870 (Det norske skattesystemet, 1974).
- 11.
This is the case of the skogsvårdsavgift in Sweden, which affected exported wood products in 1903–1911 (Svenska Akademiens Ordbok). In Norway, the so-called prisutjevningsavgifter were introduced for products considered to have very high export profits (mostly within fishing and the pulp and paper sectors) (Hjort, 1952). A tax on international traffic also existed (tonnasjeavgift or lasteavgift, levied according to tons imported or exported), as well as a new export tax created in 1956, the revenue of which was directed to a specific fund for the protection of exporters’ interests (avgift til Norges exportfond); see SOS (1958).
- 12.
An earlier state income tax, the land- og by-skatten, had been eliminated in 1837. See Hodne (1981).
- 13.
We do not discuss social contributions in this chapter, but they would also explain some of the difference seen in Fig. 1. Again, social security systems are very general in Nordic countries and very narrow (elitist) in Latin America, given the importance of informal work and private insurance arrangements.
- 14.
This figure is lower than in the early years of the century, when corporations paid ca. 30% of the state income tax in 1912–1913, and an average of 37% in 1920–1950 (data from Taxeringen and Skattetaxeringarna).
- 15.
We do know, however, that a General Sales tax was introduced in 1972, and replaced by VAT in 1982.
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Peres-Cajías, J., Torregrosa-Hetland, S., Ducoing, C. (2021). The “Fiscal Contract” in Andean and Nordic Countries, 1850–2010. In: Ducoing, C., Peres-Cajías, J. (eds) Natural Resources and Divergence. Palgrave Studies in Economic History. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-71044-6_5
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