Introduction

This chapter investigates post-communist state-building through an examination of tax collection. I seek to explain divergences in outcomes between the post-communist states of East Central Europe (ECE) and those of the former Soviet Union (FSU). While post-communist states in each region begin from similar starting points, they end up on different developmental paths. Compared to the states of the former Soviet Union, the East Central European states exhibit more democratic decision-making, more progress in developing efficient administrative capacity and greater societal consent. Focusing on the revenue bargains that were forged in response to the fiscal and political crises that unfolded in the early transition period, I explain how political battles over the creation of new tax regimes contributed to these differing outcomes. These revenue bargains became an enduring influence on the development of capacity and consent in the post-communist states. The Polish and Russian experiences illustrate the contrasting paths of ECE and FSU countries to post-communist state-building. I distinguish three sequential processes in the construction of a new tax regime: the making of revenue bargains as part of the establishment of new tax regimes; the effects of these revenue bargains on capacity to collect tax; and, the eventual remaking of revenue bargains in order to carry out tax reform. I conclude with a brief discussion of the larger political implications of revenue bargains and tax collection for post-communist state-building.