Tax Farming

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Tax Farming


a system for collecting taxes and other state revenues from the population. Under this system, the state transfers the right of collection to private individuals called tax farmers in exchange for a certain fee. Tax farmers accumulated great wealth since the taxes and charges they collected exceeded by two or three times the amount deposited in the treasury.

Tax farming is characteristic of precapitalist systems in which a natural economy is predominant, credit is not developed, the state is in financial difficulties, and communications are poor. Three forms of tax farming existed: (1) general, which encompassed a country or the entire tax system; (2) regional, which encompassed a single city or region; and (3) special, which dealt with individual taxes, such as customs duties or revenues from the liquor monopoly.

Tax farming first became widespread in Iran in the sixth century B.C. and in Greece and Rome in the fourth century B.C. In the Middle Ages, it was widespread in France from the 13th century and was also practiced widely in Holland, Spain, and England. It was one of the most important sources for the primitive accumulation of capital. As capitalism developed, tax farming was preserved in a distinctive form in 20th-century Italy, where private and savings banks collected certain taxes. In the late 19th and early 20th centuries, forms of tax farming were used for collecting tax arrears in the USA. Tax farming was widely used in the Ottoman Empire beginning in the late 16th or early 17th century; it was abolished in 1925. It was also widely practiced in Iran from approximately the tenth century to the 1930’s and in India from the 13th or 14th century to the 19th century.

In Russia, tax farming (otkup) was introduced in the late 15th or early 16th century. It was used especially for customs duties and salt and liquor revenues. Tax farming to collect liquor revenues was introduced in the 16th century and assumed the greatest importance during the 18th and 19th centuries. Treasury revenues from the liquor tax constituted more than 40 percent of the income from all taxes in the state budget. In 1863 tax farming to collect liquor revenues was abolished and replaced by an excise tax.

References in periodicals archive ?
Under the Ptolemies and the Romans, local Judean citizens engaged in tax farming, making sure that the imperial powers, local governors, and the priestly class were adequately funded.
Tax Farming in the Provinces: A Tragedy of the Commons
The reforms of Muhammad 'Ali aimed at curbing the abuse of tax farming and consolidating state power reflect similar dynamics in the broader Ottoman empire during this period, and arguably reflect the ongoing process of legal development within Islamic contexts rather than a response to "modernism.
The need to tax farming income cannot especially in the last two years, the farming sector has seen windfall profits on account of relatively better mechanization, higher yields, larger area under cultivation, higher support prices and a surge in global food prices.
The author describes the shift from the tax farming of vodka to an excise system by which distillers and retailers paid license fees and then to a state monopoly in which the distillers had to buy raw materials from the state and the state regulated standards and sales.
The environmental crisis that has unfolded since then obviously isn't important enough when there is high-band council tax farming to be reaped," he said.
The successful did so over the course of several generations by making the classic move from commerce and trade into land, tax farming, and then municipal office.
In more sophisticated economies such as the Roman Empire, tax farming developed, but the central powers could not practically enforce their tax policy across a wide realm with slow communication methods and limited regional autonomy.
Focusing on the coastal bupatis (regents), Mataram rulers, Chinese towkays (merchants), and authorities of the Dutch East India Company, he discusses how cost-benefit calculations often led various elites to cooperate with one another in the main sectors of the economy: product acquisition, tax farming, and the issue of money.
To improve revenues in other areas, Esquilache reduced tax farming and tax exemptions, which succeeded in increasing state coffers and the predictability of income.
By dispossessing the old Mamluk ruling class, changing the system of tax farming (iltizam), eliminating tax exemption from waqf lands, which covered one-fifth of the arable land, better management of state lands, and by introducing a more effective system of tax collection, his government acquired considerable financial autonomy.
The Roman system of tax farming placed a crushing burden on peasants, forcing many into debt and causing them to lose their land.