Taxation and state-building: The tax reform under the Nationalist Government in China, 1928–1949

Using primary sources and drawing on insights from the new accounting history and the new fiscal sociology, this paper examines the tax reform launched by the Nationalist Government in China during 1928–1949 as a case study to enrich an understanding of the relationship between taxation and state building. Among other things, the paper reveals a shift from the traditional Confucian ideology of “low taxes” to the Western-derived ideology of “good taxes,” used by the state to justify new taxes. It discusses how the Chinese Civil War and the Sino-Japanese War differently affected the Nationalist Government's political legitimacy and state finance and taxation. It analyzes how tax compliance was pursued by the Nationalist Government through state-society negotiations and compromises over taxation, in the absence of representative political institutions, as well as coercive enforcement of tax laws and regulations–the two approaches together actualized and delimited the new tax regime and the growing state power (legitimacy and capacity). These history/culture-specific features may be understood as variations to a general historical pattern of taxation and state building based on European-American experiences.