Emergent Themes in Taxation History
Taxation Opens in new window is a subject with an immense and very long history, possibly coincident with the beginning of advanced civilization.
Although there are many themes that emerge within tax history, they are all, arguably, different manifestations of one, basic, underlying theme — namely, the fundamental unpopularity of taxation.
Rulers and governments always need tax revenues for the reasons set out here, but those taxed have often been very reluctant to pay. This has never been more succinctly expressed than in the remark attributed to Jean-Baptiste Colbert (16–83), the finance minister to King Louis XIV of France:
The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.
Rebellion, Revolt and Fairness
One of the most dominant themes in worldwide tax history is that of rebellion and revolt against taxes perceived as unfair, because of the way they were levied, the persons on whom they were levied, the rates that were applied, etc.
David Burg, in his book entitled A World History of Tax Rebellions, Opens in new window covers a multitude of rebellions across many different time periods and countries. He comments that ‘[m]any major historic events, such as the Magna Carta Opens in new window, the American Revolution Opens in new window, and the French Revolution of 1789 Opens in new window originated largely as tax revolts’ and that tax revolts often ‘subsume larger economic, political, social and even religious issues’ as tax provides a focus for concerted opposition (Burg, 2004, p. ix).
In the case of the Magna Carta, the extent to which tax issues played a part in its genesis is not always fully appreciated.
The more usual significance attached to the Magna Carta is that of establishing the rule of law over the king’s will, and it has resonated over the centuries as some kind of protoconstitutional or human rights-type document, which was not its import at the time of its drafting. As Breay (2002, p.7) comments:
Over time, its true origin and meaning have become obscured by myths and misunderstandings about its content and significance, as it has come to symbolize principles which played little part in its creation… But it was the ways in which the charter was used after the death of King John, rather than the events of 1215, which guaranteed its status and longevity.
As Burg suggests, there was a varied backdrop to the Magna Carta. The reign of King John of England Opens in new window, which gave rise to the Magna Carta, was significant for a number of financial reasons.
It occurred at a time when the domain-based state in Europe was in transition to a tax-based state, that is, when the personal income from lands and property administered by the monarch (his domain) were insufficient for purposes of government and had to be supplemented, if not superseded, by income raised from assets or transactions the monarch did not directly own or control (e.g. church property, trade, etc.), by way of taxes (thus giving rise to the tax-based state).
John had inherited a realm in 1199 that had been drained of resources. His immediate predecessor and brother, Richard I (‘the Lionheart’) Opens in new window, had required considerable funds, not only to enable him to be co-leader of the Third Crusade Opens in new window to the Holy Land with Philippe II of France Opens in new window, but also to pay a ransom for his release, when captured on his way home by Duke Leopold V of Austria Opens in new window, who was dissatisfied with Richard’s actions in the Crusade for a number of reasons.
Richard had also instituted a program of castle building, especially in France, which required expensive maintenance. In addition, the more complex machinery government begun under John and Richard’s father, Henry II Opens in new window, with the use of paid officials, continued to develop.
In 1204, John lost Normandy and its attendant revenues to France. At a time when war with France or Scotland was endemic, all of this added up to a need for revenue above and beyond what the king’s personal possession yielded and resulted in massive tax demands being made of the populace, including the barons.
John’s need for revenue resulted in some very innovative and extortionary fiscal measures, which were characterized by being ‘add-ons’, whereby he made one tax into two, by creating entirely new taxes, increasing existing taxes and levying them more frequently and by opportunistic seizure.
In this latter case, when John disagreed with the pope’s choice of Stephen Langton as the new archbishop of Canterbury, the pope put England under a papal interdict for some six years (1208–14), whereupon John seized all the Church’s property in England — but ransomed some of it back to the clergy.
The extent of the extreme measures implemented by King John adversely affected the nobility, whose reaction was rebellion and the ultimate creation of the Magna Carta.
Of the 61 clauses in the 1215 version of the document, ‘well over half contain references to fiscal grievances, indicating a deep dissatisfaction about the way sums of money were levied or goods/financial rights arbitrarily seized by the Crown’ (Frecknall-Hughes, 2012, p. 245).
Some 23 other clauses, although not referring directly to fiscal grievances, do relate to financial matters, such as a clause on the standardization of weights and measures.
A key feature emerging from the reign of King John was the fact that, if taxes were to be imposed, the consent of those taxed was required. This was especially clear in relation to a tax of 1207, levied as a thirteenth portion of revenues and movables, taken in 1207. As Frecknall-Hughes and Oats (2007, p. 94) comment:
This tax of 1207 was an important step away from feudal taxation towards national taxation. It was levied against an unspecified future need, on property not land, and paid by most classes of society, excepting some clergy. It was collected nationally by royal justices … legitimized because it had been agreed with a council of barons who represented the community in general that would suffer it.
This was a key concept in regard to taxation for the future.
The background to the Magna Carta is not wholly dissimilar to that of the French Revolution Opens in new window, in that Louis XVI Opens in new window inherited a kingdom nearly bankrupt as the result of previous wars, especially the Seven Years’ War (1756–63) and France’s involvement in the American War of Independence (1775–83).
While there were many reasons for the revolution (the nature of the ancien régime, with absolute monarchy and lack of uniformity in the exercise of delegated authority across France, social inequality and the alleged rise of the bourgeoisie, the advent of new ideas from Enlightenment thinkers Opens in new window etc.), tax also had its part to play.
The Church paid no direct taxes (indeed, it received them in the form of tithes), nor originally did the aristocracy, who actually levied taxes on those still tied to their estates by the lingering feudal system.
While changes in the late seventeenth century meant that some direct taxes would apply to the nobility, they remained exempt from the taille (direct land tax, equating to a poll tax), which was paid by peasantry and non-aristocrats. Ironically, those who had money and could have paid taxes paid the least, if any at all. As Doyle (2001, p. 26) comments:
It was easy enough for rich commoners to buy themselves exemption as well, even if an ennobling office was beyond their means; simply moving to another town or province might be enough to secure real fiscal advantages. The burden of taxation, in other words, fell disproportionately on those least able to pay. To one extent or another, the rich were able to avoid it. It was the boast of the king’s richest subject, his cousin the Duke d’Orléans, that he paid what he liked.
The great reluctance of the French aristocracy to pay tax was significant in that it led to France often borrowing money when it was required for the pursuit of war (which had happened with its involvement in the American War of Independence), rather than raising it by taxes, and to a widespread feeling of inequity.
This was given further impetuts by the growing consideration of an income tax, whereby all individuals would be taxed in accordance with their means, and which found particular expression in the work of the writer Thomas Paine, who was an influential figure in the French Revolution.
The American War of Independence grew out of a smouldering resentment by the American colonists against Acts of Parliament passed in Britain imposing taxes on them, largely to pay for keeping standing troops there for their defense and to pay the interest on the increase in the National Debt Opens in new window, which had risen sharply as a result of funds borrowed by the British Government to fund its involvement in the Seven Years’ War.
The American colonists could not vot to elect members of parliament to represent their interests, so had no say in matters that directly affected them, hence their cry of ‘No taxation without representation’.
There were several Acts that caused particular resentment, as they were aimed especially at the American colonies, such as the Sugar Act Opens in new window of 1764 (which replaced the 1733 Molasses Act Opens in new window, and was also known as the American Revenue Act or the American Duties Act), aimed at taxing sugar and molasses production from plantations, and the Stamp Act Opens in new window of 1765.
This latter required that the colonies use stamped paper (i.e. embossed with a revenue stamp, showing that duty had been paid on it) for the production of legal documents, newspapers and periodicals — the stuff of everyday life. The paper had to be purchased from London and the tax had to be paid in British money. The Sugar Act and the Stamp Act were repealed in 1766. The principal tax that remained was the import tax on tea.
The tax on tea was a lingering remainder from a series of Acts introduced by Charles Townshend in 1767 (known as the Townshend Acts Opens in new window), again to raise revenue from the colonies, especially to pay colonial officials and make them independent of colonial influence and also establish the right of Britain to levy colonial taxes.
The Acts were extremely unpopular and led to unrest, resulting in the ‘Boston Massacre’ in 1770, in which several people died in a confrontation between local people and British troops.
The incident is regarded as a forerunner of the American Revolution. After this, the British Government repealed most of the Townshend legislation, but a tax on tea remained, on the mistaken understanding that this was somehow different in nature from taxes on sugar and paper.
The situation was exacerbated by further legislation to help the failing British East India Company, particularly by disposing of its accumulated ‘tea mountain’, and to combat a trade in tea smuggling in the form of the Tea Act Opens in new window of 1773, which, ironically, made tea imports cheaper for the colonies, despite the import duty remaining.
The British East India Company was allowed to import tea to Britain duty-free and export it to the colonies directly, without the use of middle men, thus effectively giving it a monopoly.
The combination of concerns about the independence of colonial officials, fear of other possible monopolies and Britain’s assumed right to tax the colonies led to the incident commonly referred to as the ‘Boston Tea Party’, when objectors boarded tea ships anchored in Boston harbor and threw their cargoes into the sea. This incident was a major event in the move towards the War of Independence, which began in 1775.
There are huge numbers of other rebellions against the imposition of taxes. Here only three very well-known rebellions are considered, but anyone interested in reading further about others should consult the aforementioned Burg (2004) work.
Types of Taxes
Another theme in taxation history is the different types of taxes that have been variously developed and applied, which often show the ingenuity of government and rulers in situations where taxes need to be raised from unwilling populations.
As societies have developed, so has the potential for taxing. For example, the development of record keeping and accounting records enabled profits to be calculated, recorded and assessed to tax.
Many taxes that were once common are now, of course, obsolete. Obsolescence occurs when society progresses and times change.
We have seen this in relation to the tax of scutage referred to earlier, in the reign of King John. This was originally a tax paid in the form of Knights sent by a noble land holder to join the king’s army when he required them to fight a war.
Gradually, this was commuted to money, which the king used to hire mercenaries. Such a change would not have been possible before the use of money to quantify the value of such service in money terms. However, even when the use of money became widespread, not everyone possessed it and still paid taxes in some other way.
Burg (2004, p. xi) comments that a very early and common form of taxation was the corvée Opens in new window, which was a form of compulsory labor supplied to the state, generally by the poor, and which lasted even into the nineteenth century in certain countries where people were too poor to pay taxes in any other way.
In addition, the tithe was also a common form of taxation, based on land, as a percentage of a landholder’s crops.
The concept of a tithe as a religion-based tax will be familiar to many. It occurs in the Bible, for instance, as a tenth of the fruits of the ground and cattle payable to God. However, it was a very common concept, although the amount due might vary, and is found, for example, in Egypt in the fifth century BC, c. 2390 (Burg, 2004, p. xi).
It is also referred to by the ancient Greek historian Herodotus (i, 89), in the context of the Lydians offering a tithe of their war booty as tribute to their gods. A well-known tithe was the one in the reign of Henry II (the ‘Saladin tithe’) to raise funds for the Third Crusade to try to win back Jerusalem from the great Muslim leader, Saladin.
Many members of religious communities still give a tenth of their income to support their faith, and it was a very common obligation due to the Christian Church in medieval times, when it was a crippling obligation for the poor, as it was often payable in kind, for example, produce, cattle, etc., which meant loss of livelihood, if not life, as many would starve.
While some of the taxes of post-Conquest medieval England have been mentioned already, there are others that have not been, such as:
- amercements (fines) imposed by the king’s justices for violation of the law;
- the firma burgi, a lump sum paid by certain towns for the privilege of farming the town revenues;
- income from feudal ‘incidents’, whereby an heir had to pay sums to inherit property when a parent died; and
- fines or oblations, payments to the king for such privileges as permission to marry a certain person, have custody of the lands of minors, bring cases into the king’s court, delay or expedite a trial, and grant and confirm charters (some of these overlapped with feudal incidents).
A medieval monarch also obtained a good deal of revenue from the royal forest, especially from courts known as forest eyres, which doled out fines to persons violating the very stringent forest laws.
The above list represents income that was raised on a regular basis and was thus termed ‘ordinary’. Additional (termed ‘extraordinary’) revenue was frequently required when ordinary revenues were deemed insufficient, such as when the king went to war.
Scutage and carucage, as mentioned earlier, were two such taxes. Others were tallage, which was levied on the towns and demesne lands of the Crown; dona or auxilia, taken from Jewish or other money lenders, prelates and religious houses; and a range of different taxes on movable goods and property, levied at various rates, such as a seventh, a thirteenth, a fifteenth, a twentieth, etc., which actually continued well beyond the medieval period, into the seventeenth century.
There were also poll taxes, the one in 1381 in England being so unpopular that it acted as an immediate catalyst for a rebellion (Wat Tyler’s Rebellion), which links also with the theme of rebellion above.
The tax was imposed as a flat rate tax on every layperson in the kingdom, regardless of their circumstances, which was regarded as unfair. A similar criticism was made of the Poll Tax (officially known as the Community Charge) introduced in Great Britain in 1989–90, which also was attended by great civil unrest and protest. Rebellion often accompanied poll taxes.
Over time, there have been taxes on wine and goods exported (‘tunnage’ and ‘poundage’), and on as many different kinds of livestock, raw materials, manufactured goods, (alcoholic) drinks and foodstuffs as anyone might conceivably think of.
There have been taxes on land, hearths, windows, glass, bottles, candles, leather, playing cards, dice, soap, paper, printed materials, starch, proprietary medicines, plated metals, iron, bricks, tiles, hats, gloves, toiletries, timber, hawkers, servants, bachelors, seeds, even beards (in Russia under the Peter the Great). The list is almost endless. It is summed up by the author and critic Sydney Smith, in 1820 in an essay in the Edinburgh Review:
Taxes upon everything which it is pleasant to see, hear, smell, or taste. Taxes upon warmth, light, and accommodation. Taxes on everything on earth or under the earth, on everything that comes from abroad or is grown at home. Taxes on the raw material, taxes on every fresh value that is added to it by the industry of man. Taxes on the sauce whch pampers man’s appetite, and the drug which restores him to health … on the poor man’s salt and the rich man’s spice; on the brass nails of the coffin, and the ribbons of the bride: at bed or board; couchant or levant, we must pay.
The above is quoted in the context of Great Britain raising taxes to fight wars. Another significant tax, income tax Opens in new window, was introduced in Great Britain in the eighteenth century to do the same.
Governments, desperate for revenue, were often willing to resort to any means to raise money. Some means worked better than others. Income tax meant a shift from taxing things and people to the more nebulous concept of income, earnings and profits, which were less identifiable or measurable.