Tax Farming


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The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

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.

The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
Kiyotaki presents the accomplishments of the Ottoman governors in Baghdad by examining in detail tax farming, tapu landholding, and crop sharing during the Tanzimat period 1939-76, and the modification of these practices during the Hamidian period and the rule of the Committee for Union and Progress (1876-1914), followed by the British occupation and mandate period (1914-32).
Wade Tovey, chairman of campaign group Our Green Ways that focuses on developments around south Middlesbrough, accused the councils of excessive building to bring in more cash under what was dubbed 'council tax farming.'.
In between, one observes the abolition of the poll tax, the elimination of quit-rents on state land, and the creation of the state land tax in 1886; the replacement of tax farming with excises on vodka and other goods in the 1860s, the creation of a vodka monopoly in 1894, and the catastrophic ban on vodka sales in 1914; the institution of repartitional and corporate income taxes on business in the 1880s; the creation of a tax inspectorate to oversee the collection of state revenue in 1885; the enactment of personal income taxes in 1916; and the return to various tsarist practices under the New Economic Policy (NEP) in the 1920s.
Under the tax farming system, private entrepreneurs, mostly of Chinese origin, paid the state an annual fee for the exclusive right to collect and retain taxes on the production, importation and sale of alcoholic drinks, primarily rice spirits and rice wine, in particular areas of the country.
Henry, in an investigative research paper, described PSI services as a First World-based industry that is really a throwback to the 'tax farming' of the Middle Ages, when European governments outsourced tax collection to private agents.
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.
* Adnan Khan, London School of Economics; Asim Khwaja, Harvard University and NBER; and Benjamin Olken, "Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors"
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 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.