The Rise of General Consumption Taxes

The chapter analyses the spread of general consumption taxes. It makes two points. First, it shows that the initial introduction of a general consumption tax has boosted revenue-raising capacity in countries around the world. Typically, the first general consumption tax was not a VAT but a less technically sophisticated general sales tax. Second, the chapter uses event history analyses to demonstrate that the uptake of the first general consumption tax was facilitated by revenue needs arising from: (1) mass interstate warfare in the first half of the twentieth century; (2) the adoption of major welfare initiatives; and (3) a marked deterioration of public finances. The historical trajectories of three cases—France, Japan, and Chile—corroborate these findings and call for further study.