Do we need a Lady Godiva

Updated: Feb 12 2002, 05:30am hrs
Everyones mind now turns to death and taxes. Wealth of Nations has four principles of taxation. First, taxes must be based on ability to pay. Second, taxes must be certain and not arbitrary. Third, taxes must be levied such that it is easier for the citizen to pay. Fourth, there must be a clear link between what the citizen pays as taxes and benefits obtained from the government. The fourth point is related to the distinction between taxes and fees. The quid pro quo is immediate for fees, but is non-transparent for taxes. This non-transparency explains much of the resentment towards taxation. Had it not been for the free-rider problem and progressiveness implicit in the ability to pay idea, all taxes could have been replaced by fees and the resentment would perhaps have been less.

Who will object to a war surcharge without being accused of being a traitor Admittedly, a war surcharge now seems unlikely. But the need for hiking defence expenditure is a compelling reason for not removing the earthquake surcharge. All income taxes actually owe their origin to wars. In ancient Greece, the Athenians imposed a tax known as eisphora. This was for war-time expenditure and is one of the rare instances when the tax was scrapped after the war. There were even refunds when the amount collected was more than what was required for the war. Britain is another example. In 1800 an income tax was imposed for the war with Napoleon and was repealed in 1816. Opponents argued that this tax (meant for the war) was so abhorrent that all its records should be destroyed, including records of its repeal. Apparently, the Chancellor of the Exchequer publicly burnt all records. But some records remained in the basement of the tax court. So we know what happened. The US has a similar history.

An income tax was proposed during the war of 1812, but was not implemented because hostilities ended. Later, in 1862 during the Civil War, another income tax was proposed and the Commissioner of Revenue said: The people of this country have accepted it with cheerfulness, to meet a temporary exigency, and it has excited no serious complaint in its administration. The tax was challenged in the Supreme Court, but was held to be constitutional. However, after the Civil War was over, the Supreme Court held the tax to be unconstitutional, since the Constitution didnt provide for direct taxation. The US had to rely on customs revenue, until the Constitution was amended in 1913. Turnover taxes in Germany in 1918 and Britain in 1940 were war-time measures. Augustus Caesars inheritance tax, the precursor of English and Dutch inheritance taxes, was also indirectly linked to war. The 5 per cent inheritance tax (imposed on those other than children and spouses) was designed to provide retirement funds for the army. This earmarking for downsizing is something North Block should take note of.

Resentment at unjust, excessive or arbitrary taxation has led to many revolts, including those during Oliver Cromwells time in England, where excessive excise duties were imposed on essential items like grain and meat, or in the Whiskey Rebellion in post-revolution America. Unjust taxation also motivated the French Revolution and the rebellion of the American colonies against Britain under the slogan, No taxation without representation. The hundred years war (1337 to 1453) between England and France wasnt exactly a war that lasted for a hundred years, because fighting was sporadic. The trigger for a renewed conflict in 1369 was the revolt by the nobles of Aquitaine over oppressive taxation by Edward, the Black Prince.

Perceptions about unfairness also seem to be related to the method of collection. Initially, all tax collection was farmed out. In the Ottoman Empire, tax collection rights were farmed out to the highest bidder. The Egyptian scribes were nothing but tax collectors, as were the Roman publicans. St Matthew was a publican. Augustus Caesar scrapped the publican system and introduced a new regime of tax collection, with revenue collection functions decentralised to cities. The Egyptians seem to have had the earliest system of the resultant inspector raj. (Naturally, Adam Smiths third principle came much later.) The Egyptians had a tax on cooking oil. To ensure that households didnt avoid paying the cooking oil tax, scribes or inspectors would descend on households to ensure that the right amount of cooking oil was being used and non-taxed cooking oil was not being used as a substitute.

One wonders how the Emperor Vespasians tax on public urinals (or on urine used for tanning) or Peter the Greats tax on beards was administered. Or the Athenian monthly poll tax on foreigners, defined as those who didnt have an Athenian father or mother. This tax also varied according to gender, being double for men. Julius Caesar was responsible for introducing the sales tax. But this was 4 per cent for slaves and 1 per cent for everything else. How was that administered There must have been the Liu Chin phenomenon. Liu Chin (who was also an eunuch) was a corrupt tax collector in early 16th century China, during the Ming dynasty. When he was eventually banished, a fortune in gold, silver and gems was discovered in his house, together with false seals.

One does know that Boadiceas revolt against the Romans was largely motivated by corrupt tax collectors. Although the revolt was crushed, Emperor Nero had to appoint new tax administrators. There is also the story of Lady Godiva from 11th century England. Her husband, Leofric, Earl of Mercia, imposed very high taxes on residents of Coventry. Lady Godiva rode naked through Coventry in protest and the Earl removed the high taxes. Because this was being done for their sake, the citizens of Coventry did not look out while she was riding. The sole exception was a tailor named Tom. Hence the expression Peeping Tom, a legend added to the Lady Godiva story in the 17th century. Apparently, Peeping Tom was struck blind (or struck dead according to some legends) as punishment.