8
$\begingroup$

As is my understanding (this is not my specialty), for the vast majority of history the crown (whatever sovereign entity exists at the head of the state) gathered income through a few means:

  • Tariffs (relatively easy to implement, but don't work for domestic goods)
  • Stamps (also relatively easy to implement, but hard to balance with cost of doing business across businesses)
  • Royal charters (this also effectively covers any centralized licensing system)
  • Feudal tithes (and then the sovereign entity becomes someone a little closer, but the same problems ensue)

The problems with these methods is that they have a cooling effect on growth. Royal charters in particular prevent people from investing capital and creating businesses to fill a market need. Feudal tithing engenders mismanagement by feudal lords. Tariffs in a low-technology environment are easy to circumvent (hence the whole smuggler occupation). Uniformly priced stamps make small transactions prohibitively expensive.

The state has need of capital for various uses (defense, civil order, public works, etc.). So it needs some taxation system. What is the minimum level of technology necessary to implement a basic form of a modern tax system (be it VAT or income)? How would it be circumvented? How would it be enforced?

Edit: I should be clear that I'm trying to avoid taxation schemes that will obviously lead to mismanagement /undue pain on the populace. Things like selling of tax collection licenses encourages legbreakers.

Its obviously true that any tax is going to have a cooling effect on growth (Assuming that tax money isn't being spent on public good). But some tax systems are worse about this than others. Let's consider an optimal tax as that which causes the least pain in the populace per unit revenue.

$\endgroup$
  • 4
    $\begingroup$ Actually, for a very wide span of historical time, the major sources of revenue were land taxes (x percent of the value of the land), sales taxes (x percent of the sale price for expensive goods such as slaves), head taxes (capitation, x coins per head) and customs dues. Stamps and royal charters are utterly modern, post-Renaissance. Feudal tithes were never a source of revenue for the crown. Another thing to consider is that for most of history taxes were very very much lower than in current times; and income taxes were unknown until the 19th century. $\endgroup$ – AlexP Apr 5 at 20:00
  • $\begingroup$ Wikipedia indicates that income tax has existed since Roman and Egyptian empires. It's hard to see what your issue is, but your questions seem to me to be far too broad anyway. $\endgroup$ – StephenG Apr 5 at 20:02
  • 1
    $\begingroup$ I believe it would be easier to answer your question if you tell us roughly the time period in which your story is set, and then ask what the taxation system may look like, rather than the opposite. $\endgroup$ – Alexis Apr 5 at 20:06
  • 3
    $\begingroup$ Any tax has "a cooling effect on growth". $\endgroup$ – Gangnus Apr 5 at 20:31
  • 1
    $\begingroup$ @gangus Not true. A tax that is spent on infrastructure can have a heating effect if it pulls money out of savings. Inheritance taxes also have a heating effect. $\endgroup$ – SRM Apr 7 at 1:02
6
$\begingroup$

I have a different slant than the two previous answers, but only slightly:

  • First, you need a money-based economy, or at least one which routinely puts monetary value on things. If the land owner gets "one fat hog on pentecost" from each tenant farmer, the state doesn't want a percentage of those hogs, it wants money.
  • Second, you need a high division of labor. If the average household does much of their own food production (kitchen gardens), clothes production (spinning wheels and looms), etc. then it is hard to tax a fraction of the income or value added.
  • Third, you need widespread literacy and numeracy to record the transactions from the first two steps.

One possible workaround is mandatory division of labor with taxation at this step. Say the farmers are not allowed to mill their own grain, they must go to the overlords' windmill that will keep a fixed percentage. The possession of hand mills is a crime. Still rather close to the feudal tithes concept, of course. So you cannot really avoid a society where people handle cash on a daily basis.

$\endgroup$
6
$\begingroup$

It's not technology which makes an income tax possible, but the political system. In order to collect a fair, broad-based income tax, you need an accepted rule of law. (I say "fair" and "broad-based" because confiscation is always workable, and even an ancient society could tax based on looking at a rich person's wealth-producing properties and assessing them a fraction of what they ought to be able to produce. This is not workable on a mass basis nor is it workable if it is to be based on actual income.)

You need a rule of law because a fair and broad-based income tax depends on being able to know what peoples' income has been. This implies considerable organization and basic societal cooperation. It also requires that honest accounting is the norm. (If accounting is basically meaningless, it will quickly devolve into confiscation.)

(The same would be true of a VAT.)

The technology needed is little more than good record-keeping and basic accounting. The Romans had the former and the latter was an early Renaissance innovation which the Romans could certainly have developed.

Addendum: It occurs to me that medieval Europe had a rough and ready income tax in some areas where farmers paid the local baron and the local church (which between them was most of the government they ever saw -- police, welfare dept, hall of records) a percentage of their crops each year. That's an income tax by any definition. (In other areas they paid a fixed amount, making it more like a poll tax.) Note that no accounting was needed, since the amount of the harvest each year was visible to all.

$\endgroup$
  • $\begingroup$ ou also need a populace that has incomes, with the feudal system for instance the majority of the populace does not have an income. Their "job" was to farm enough to feed themselves. $\endgroup$ – John Apr 6 at 12:48
  • $\begingroup$ @John It sounds like you're thinking of cash income. It's true that a majority did not get paid in cash, but cash is not the only kind of income even today. In medieval times, most people were farmers and most income was the yield of their labor on the land. And in the feudal system everyone who was part of it paid to support the layers above, whether through tithing, rents, labor or armed service. Free rides within the system were rare. $\endgroup$ – Mark Olson Apr 6 at 12:57
  • $\begingroup$ A feudal tithe is not an income tax. It applies to the physical produce of the land leased by the landlord, it does not apply to income in general. The farmer and their family could (and did) derive income from other activities. Moreover, the tithe was a private contract between the tenant and the lord, it had nothing to do with the state. As for the tithes paid to the church, they were paid to the church, not to the state. The question is about state revenue. $\endgroup$ – AlexP Apr 6 at 15:27
  • $\begingroup$ Income in kind is still income. The IRS says so today (though it's small enough of an issue they don't enforce it much) and this is not something new they've invented. In a pre-money economy, income in kind was all most people had. $\endgroup$ – Mark Olson Apr 6 at 19:32
  • 1
    $\begingroup$ @AlexP History has many examples throughout Europe with little difference between church and state in many regions. The easiest to highlight is Italy where the tithes went to church coffers and were spent by cardinals temporal and spiritual. I think the church tithes answer is therefore valid. $\endgroup$ – SRM Apr 7 at 1:07
3
$\begingroup$

For effective collection of VAT the recent states had introduced special counters (I am not sure about the name), that every or every medium or big seller should have and use. All this automation was introduced during the last 10-20 years. So, even 20 year old technology cannot fully support the contemporary tax system.

But that is correct for the contemporary society only.

I agree that the technology is less important than the political system, but even more important is the moral level of the society. In the more honest society you can use much more complicated tax system without the need of any complicated control.

Another very important parameter is the size of the society. In the small town-state everyone simply sees into the pocket of everyone else. And you can easily make any intelligent tax system to work without any technology.

$\endgroup$
  • $\begingroup$ VAT collection can also be made to work by cross-checking records. If the restaurant buys lots of coffee but never sells any, something is wrong. If the wholesaler sells coffee but the restaurant didn't buy it, something is wrong. And so on. $\endgroup$ – o.m. Apr 6 at 4:05
  • $\begingroup$ @o.m. Yes. And to make this cross-checking possible and sure they make all sellers to print a cheque for every buy. $\endgroup$ – Gangnus Apr 6 at 15:31
  • 1
    $\begingroup$ I was paying VAT in the early 1990s when most accounting was still pen on paper. Computing clearly wasn’t needed. $\endgroup$ – SRM Apr 7 at 1:09
  • $\begingroup$ @SRM The question was not about the set of tax names, but about the recent tax system, that includes direct and mutual checking. And the fact that they needed to introduce much more complicated technology means that the current states really needs it. $\endgroup$ – Gangnus Apr 14 at 16:59
  • $\begingroup$ @gangnus No. The tech made the VAT collection cheaper, not possible. The existing system can be run on people with paper accounting. $\endgroup$ – SRM Apr 14 at 23:15

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.