A discussion of the ramifications, although important, is beyond the scope of this chapter. This is a substantial impediment to the rule of law in tax matters. In some developing and transition countries, however, the judicial system does not, for various reasons, effectively fulfill its role. The role of the courts is often referred to in this chapter.
The rule of law contemplates that these principles will be enforced by independent courts. The fundamentals of this framework are that (1) a tax can be levied only if a statute lawfully enacted so provides, (2) a tax must be applied impartially, and (3) revenue raised by a tax can be used only for lawful public purposes, not for the prince’s private ends. In general, the basic legal framework calls for taxation according to the rule of law.
Although modern income and turnover taxes did not yet exist, by the middle of the nineteenth century the basic legal framework for raising these taxes had been established and with it the foundation for the spectacular increase in tax revenue that would occur almost a century later, during and after World War I. Modern fiscal systems emerged in Western Europe and North America during the half century that followed the American and French Revolutions.
