The Fiscal Consequences of Peace: Taxation and veto power in post-conflict countries

Abstract: Effective and fair taxation is imperative for development and thus sustainable peace in post-conflict countries; yet there is a glaring paucity of generalizable research on the subject. Drawing on theories from Political Economy and Comparative Politics this thesis investigates how political veto powers affect these states’ ability to mobilize domestic resources. An integrated model of delayed policy adjustment is presented and applied to the economic structure and political institutions of post-conflict countries. It is predicted that the number of veto players and the existence of power-sharing agreements inhibits fiscal policy reform resulting in forgone tax revenues. Utilizing a mixed-methods research design, a statistical analysis is conducted using data from 34 post-conflict recovery periods. These results in turn guide the selection of two cases (Uganda and Lebanon) for in-depth investigation, geared towards evaluating the proposed causal process. The combined results show that veto power does matter for post-conflict revenue mobilisation, in so being that power-sharing agreements inhibits swift and comprehensive fiscal reform, resulting in lower levels of tax revenue. While the results for veto players were less conclusive, the case study analysis confirmed the existence of serious validity problems, indicating the need for better data on political institutions in developing countries.