Democracies Still in Peril: Reexamining Revenue Mobilization in Liberalizing Developing Economies

Do developing country democracies continue to struggle with revenue loss post-trade liberalization? This article revisits the evidence presented in Democracies in Peril and confirms that, despite critiques suggesting otherwise, a substantial revenue shock persists following tariff reductions, and democracies in less developed countries (LDCs) remain particularly vulnerable. Drawing on updated data from the World Development Indicators and supplemental checks with the International Centre for Tax and Development database, we show that democracies have lagged behind nondemocracies in compensating for lost trade tax revenues, even after reforms aimed at expanding income taxes and value-added taxes. Alongside emphasizing ongoing domestic political obstacles in liberalizing democracies, we also examine emerging challenges that impede revenue generation in LDCs. We conclude with directions for future research on the politics of revenue generation in LDC democracies, emphasizing how improvements in public goods provision and global tax initiatives could help end the downward cycle in revenue generation.