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Consumption taxation in the european economic community: fostering the common market or financing the welfare state?


Haffert, Lukas; Schulz, Daniel F (2020). Consumption taxation in the european economic community: fostering the common market or financing the welfare state? Journal of Common Market Studies, 58(2):438-454.

Abstract

The literature on the comparative political economy of taxation often links consumption taxation to the welfare state. It argues that the expansion of consumption taxation paid for the expansion of welfare states and that bigger welfare states therefore tax consumption more heavily. We challenge this perspective by looking at the introduction of the Value Added Tax (VAT) in the European Economic Community in 1967, the breakthrough of this form of consumption taxation. Studying the crucial case of Germany, and complementing it with the shadow case of the Netherlands, we demonstrate that political struggles about this reform did not center on a conflict between supporters and opponents of welfare state expansion. Instead, the VAT was primarily a tool to foster market integration in Europe by reducing barriers to trade. As we show, the coalition in support of the VAT only succeeded after it won the backing of important export interests.

Abstract

The literature on the comparative political economy of taxation often links consumption taxation to the welfare state. It argues that the expansion of consumption taxation paid for the expansion of welfare states and that bigger welfare states therefore tax consumption more heavily. We challenge this perspective by looking at the introduction of the Value Added Tax (VAT) in the European Economic Community in 1967, the breakthrough of this form of consumption taxation. Studying the crucial case of Germany, and complementing it with the shadow case of the Netherlands, we demonstrate that political struggles about this reform did not center on a conflict between supporters and opponents of welfare state expansion. Instead, the VAT was primarily a tool to foster market integration in Europe by reducing barriers to trade. As we show, the coalition in support of the VAT only succeeded after it won the backing of important export interests.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Scopus Subject Areas:Social Sciences & Humanities > Business and International Management
Social Sciences & Humanities > General Business, Management and Accounting
Social Sciences & Humanities > Economics and Econometrics
Social Sciences & Humanities > Political Science and International Relations
Uncontrolled Keywords:political science and international relations, economics and econometrics, general business, management and accounting, business and international management taxation; common market; value added tax; business interests; welfare state
Language:English
Date:March 2020
Deposited On:27 May 2020 11:45
Last Modified:23 Apr 2024 01:40
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:1468-5965
OA Status:Closed
Publisher DOI:https://doi.org/10.1111/jcms.12928