Introduction

Taxation is the new frontier for those concerned with state-building in developing countries. ‘The history of state revenue production’, as Margaret Levi declared, ‘is the history of the evolution of the state’ (1988: 1). Taxes underwrite the capacity of states to carry out their goals; they form one of the central arenas for the conduct of state–society relations, and they shape the balance between accumulation and redistribution that gives states their social character. Without the ability to raise revenues effectively, states are limited in the extent to which they can provide security, meet basic needs or foster economic development. Yet the political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens.