Abstract
How does authoritarianism shape the tax regime as a fundamental dimension of state capacity? Following the predatory state theory, I claim that the authoritarian ruler appreciates stronger monopoly of political resources and bargaining power for maximizing the tax revenue, but also be frustrated by higher monitoring and agency costs. When the authoritarian ruler raises and centralizes the tax revenue, it usually leads to the apportionment of expenditure and the expanding predatory behaviors of the local agency. Also, the fiscal expenditure is in favor of the administrative spending and some infrastructure rather than education, health-care and social welfare. Therefore, it leads to the rent-seeking of cadres and the inversed redistribution between the rich and the poor.The case study of Chinese sharing tax reform in 1994 demonstrates the effects of fiscal centralization under authoritarianism. After 1994, the central government extracted greater share of tax revenue as well as apportioned the expenditures, and the local government reduced the public services as well as strengthened the exploitation to the peasants. The statistical evidences from the provincial panel data between 1978 and 2004 confirmed that the fiscal reform increased the local administrative expenditure and deteriorated the regional inequality in China. Summing up, the authoritarian fiscal centralization can hardly enhance the state capacity; instead, it suffers from the principal-agent problem, which constrained the effectiveness of both the administrative capacity and the redistributive policies.