The War Within by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783319980508
Publisher: Springer International Publishing

1 A System of Tax Farming

The Dutch Republic of the eighteenth century had a relatively high number and large variety of taxes; something contemporaries had already noticed (De Mandeville 1988: 187; Smith 1981: 906). Taxes mostly consisted of indirect excises on popular consumer items such as bread or wine. Since 1583, the collection of these excises in the province of Holland was largely done by tax farmers in collaboration with public authorities. Tax farmers were private businessmen who bought the right to collect taxes, usually for half a year or a year (but sometimes for years in succession), during annual auctions organised by the local authorities in close consultation with general guidelines as set out by the Provincial Estates . In order to acquire the farm, tax farmers had to pay a deposit and were obligated to hand over a part of their proceeds to the authorities in monthly payments. The amount to be paid was determined in advance of the auction and was based on expected returns.

Tax farming systems have been around since antiquity and were common in other early-modern European states such as France , Prussia , Britain or Spain . The system ensured the authorities of a steady flow of revenue without having to establish or operate an elaborate and expensive organisation for collection (Ma 2003: 9). At the same time, the system encouraged aggressive levying. After all, tax farmers had to collect enough to pay their monthly dues and had to recover their deposit. In addition, they were also allowed to keep the difference between the estimated amount (the money they paid to the authorities every month) and the money they actually collected (Dekker 1982: 134; Heringa 1983: 83). The authorities relied on the self-interest of entrepreneurs to acquire revenue; entrepreneurs willing to take risks (consider harvests or trade routes affected by bad weather or war) that government thus did not need to worry about.

While the system was beneficial for tax farmers and authorities alike, its basic set-up led to abuses, also in the Republic. While the Dutch tax farmers, together with the city and provincial regent elite were, in theory, tied to excise levels set by the authorities (Dekker 1982: 132), they did often abuse their powers to collect more than was allowed. Lack of supervision and complexity and variety of rules were part of the problem. There were also other—more fundamental—issues. Most importantly, the organisational arrangements of tax farming effectively facilitated fraud and abuse of power . Self-interest was a major catalyst of the system and ensured that tax farmers and public “law enforcement officials” (bailiffs , sheriffs , debt collectors and the like) were, for instance, awarded parts of people’s fines to supplement their income. This could for instance lead to arrests on false charges to collect more pay. The variety of offences such as smuggling , bribery or price fixing was endless. People would change the prices of excises , deliberately over- or underestimated expected revenues, cheated with tax receipts, or bribed people who weighed goods at markets.

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