Effects of a Constitution on Taxation: The Role of Constitutional Review in the Development of Tax Laws in Estonia

Abstract

This paper examines the role of constitutional review in the development of tax laws in Estonia. The case study of Estonia is used for testing the theoretical propositions derived from the existing literature on constitutional politics with regard to the willingness of the constitutional court to pass judgements that are costly for the budget and the likely reactions of the legislature to such costly judgements. The Estonian case demonstrates that the Constitutional Review Chamber has been repeatedly willing to go ahead with costly rulings on tax laws, and the legislature has, for most part, deferred to the court in these decisions. The case study indicates that although the strategic interaction models employed by the existing literature can provide some insights into the decision strategies of courts and legislatures in the constitutional
review of tax laws, a more complete explanation should pay attention to the symbolic role attached to constitutional review by the actors involved and to path dependencies that specific rulings can create.