CHAPTER VII

EEVENUE SYSTEMS OF IMPORTANT COUNTRIES

82. Modern Revenue Systems Have Developed Since
Feudalism. Many early states, such as Greece and Rome,
furnish examples of well-developed fiscal systems. With
the growth of feudalism, however, their importance waned,
since under this regime the ruler had direct command
over a large amount of economic goods and services.
The burden imposed upon the individuals was often heavy
in fact, it was ordinarily no less than the burden im-
posed by modern taxes. Money economy had not yet
developed, and these payments were made in kind. As
money began to be used, and as the functions of the state
began to be widened, a number of monetary payments
appeared which at first were considered as commutations
for some of the older feudal dues.

The first payments were demanded for such services as
maintaining roads and bridges, for protecting travelers,
and for the privilege of importing and exporting goods.
It was not long until taxes were levied upon land and
other marks of ability to bear tax burdens. The early
base of most importance, other than land, was some form
of building tax, sometimes upon the building itself, and
sometimes upon some distinctive part, such as windows
or hearth. It is interesting to note that the payment of
these early taxes was looked upon as an indication of ser-
vility. No direct taxes were at first levied upon the free-
men. The influences of this policy may still be seen in
the methods of making assessments in some European
countries.



REVENUE SYSTEMS OF IMPORTANT COUNTRIES 139

Agriculture, in some form, was the predominant indus-
try for many years. While this was true, taxes based
upon land were, to a large degree, satisfactory, and com-
plied reasonably well to principles of justice. Land, how-
ever, did not continue to be the sole source of income.
Commercial pursuits, and other trades and crafts devel-
oped, which made it possible to secure a living, and more,
without owning or directly using land. The governments
began to extend their services, which meant the need for
more revenues. It seemed expedient to secure a part of
the increased revenue from these new forms of wealth,
and the early tax systems of various countries indicate a
branching out to new sources of revenue. The develop-
ment was not always the same, and different taxes were
used in different countries. It will be instructive to trace
briefly the development of the tax system in some of the
more important countries.

83. Early Taxes in England Took a Variety of Forms.
Some of the first taxes in England took the form of com-
mutations. One of the earliest was known as the ship-
geld. When the country was threatened with invasion,
the coast towns were expected to furnish ships to aid in
the defense. If, for any reason, they did not do this, the
tax was levied, and was used exclusively for naval pur-
poses. This might be looked upon as a commutation for
naval services. An interesting early revenue, while not
exactly a commutation, was the Dane-geld. It was levied
upon land, and paid as tribute to the Danes to keep them
from invading the coasts of England.

The taxes just mentioned were levied to secure particu-
lar services, and the persons taxed were exempt from
personally rendering the service. A number of early
taxes, however, were levied to secure revenue for general
purposes. One of the earliest of these was the hearth
tax. This, in effect, was a tax on the family, and was
used for a long period of time. Need for increased rev-
enue led to the adoption of still other taxes, One of the



140 OUTLINES OF PUBLIC FINANCE

first was upon tenants occupying royal lands. It was
gradually extended until it applied to all rents. It varied
at different times, and the tax was often known by the
amount taken, as " fifteenths" and " tenths." At times
these taxes were supplemented or replaced by some form
of poll tax. The exemptions from poll taxes were few,
since they were levied upon all men and women above a
certain age, actual beggars alone being excluded. It is
interesting to note, however, that these poll taxes were
often graduated on the basis of property. Some of the
more popular rulers secured special funds from the richer
classes, which were termed " benevolences." Another
fruitful source of funds which was extensively used at
various times was the charge made for granting industrial
monopolies. The field open to competitive industry was
at times extremely limited, and the burden placed upon
the consumers of products was severely felt.

Besides all these forms of direct taxes, duties were levied
upon goods which came in or left the country, and that
they were generally found as a part of the fiscal system
can be seen from the fact that they were called " cus-
tomary duties." The modern expression, "customs
duties," had its origin in this early phrase.

84. Later English Taxes Are More Permanent. Many
of the direct taxes which are indicated above were grad-
ually given up, while the most important one a direct
tax on land became a permanent source of revenue. No
very definite policy was followed in levying the tax. In
order to secure more revenue from larger payments, the
privilege was often granted of commuting all future taxes
by a single payment. Such a policy, of course, was ill
advised, since it used for present purposes what should
have been kept for future needs.

Land Assessment. The land tax continued to be an
important part of the fiscal system. In the course of de-
velopment, assessments began to be made on some definite
basis, and the easiest was that of area. The injustice of



REVENUE SYSTEMS OF IMPORTANT COUNTRIES 141

this soon became apparent, and the gross product was
substituted. Gradually, however, the net product was
brought to the front, and this still remains the base.
Taxes are regarded as a charge upon rentals, since land
values are calculated in terms of rents, rather than in
terms of selling price. " Twenty years' purchase 77 is an
expression little used in America, yet common in England.

Income Tax. The wars hi which England engaged
about the first of the nineteenth century created a demand
for more revenue than was being supplied by the existing
sources. It was then that the income tax was introduced,
a form of taxation which has since occupied an important
place in the fiscal machinery. The provisions of some of
the early laws appear decidedly modern. A simple de-
gressive scheme was used a fixed exemption was allowed,
and a proportionate rate was levied upon the remainder.
With incomes of a certain nature, such as salaries and
rents, the tax was to be deducted before the income was
turned over to the owner. This method is known as col-
lection at source. With other classes of income, a declara-
tion of the amount of income was to be made, and the tax
levied upon this. In cases where there had been a pay-
ment at source, while the entire income was less than the
granted exemption, the person from whose income the
tax had been taken was to be reimbursed by the govern-
ment. 1

Except for a few years, the income tax has continued
to be used extensively, and to-day, combined with prop-
erty taxes, forms the most important part of the revenue
system. Inheritance taxes, or " death duties," as they
are called in England, also form a part of the fiscal system.
Some old land and building taxes are still used, but are
relatively unimportant.

Customs Duties. The attitude taken toward customs



1 A detailed discussion of these methods of levying an income tax, to-
gether with a discussion of tho present English income tax, is given in
Chapter XII.



142 OUTLINES OF PUBLIC FINANCE

duties is an interesting phase in England's fiscal develop-
ment. The importance of their early use has already been
indicated. About the middle of the nineteenth century,
however, after considerable agitation and opposition, the
protective principle was largely removed from the tariff
laws, and at the same time any protective feature in the
remaining duties was offset by the excise duties. The agi-
tation for such action was from the classes who wished to
foster an .extension of trade and who considered that
much of the misery of the lower classes was due to the
protective laws.

The agitation for the reduction of duties centered around
the repeal of the corn laws. These had been kept in force
to secure higher prices for the products of land so it could
more ably meet the taxes which were imposed upon it.
Since the repeal of these laws, protective duties have had
no very important place in England's fiscal policy. Her
tariff schedules are primarily for revenue, are composed of
few commodities, and are comparatively simple.

Local Taxes. Contrary to the situation in most Euro-
pean countries, the local taxes of England have always
been more or less separated from the influence of the cen-
tral authorities. The levies are made and collected by
local authorities for the use of the local district. The taxes
are often levied for particular needs, and are known by
the purpose for which the levy is made, as, for example,
the poor rates. Land in some form was at first the prin-
cipal base of assessment, but other bases have developed.
Some indirect taxes are also used in securing funds for the
different localities.

85. Indirect Taxes Play an Important Role in the Fiscal
System of France. The feudal period in France, as in
England, contained a number of exactions for the govern-
ment. These were generally upon land, and were more of
the nature of rents than of taxes. As feudalism disinte-
grated and government activities increased, larger rev-
enues became imperative. Taxes upon articles of con-



REVENUE SYSTEMS OF IMPORTANT COUNTRIES 143

sumption were extensively used. Because of the general
acceptance of the mercantilist doctrine, charges were also
levied upon imported goods. These taxes formed the
most important part of the early French revenue system.
The consumption taxes were upon such articles as drinks,
jewelry, paper, oil, and the like. Besides taxes upon goods
coming into the country they were often levied upon
goods which were brought into the cities. They were
levied at the city gates and were called gate taxes.

Early Direct Taxes. A number of more or less direct
taxes also found a place in the early fiscal system. Their
form resembled, somewhat, the exactions which had been
made under feudalism. One of the earliest taxes used
was very similar to the modern general property tax,
since land, rentals, and various sorts of property were
taken as the measure of the tax which was to be paid. A
source of revenue which was occasionally used was a sort
of income tax. It was one or more twentieths of the
income from land or other property. Somewhat similar
was the tax exacted for the benefit of the church. This
was a certain fraction, not always the same, of the prod-
ucts of the land, and was to be paid in kind.

An interesting demand upon the people was that of
services for the maintenance of highways and other forms
of public utilities. The levies were made, both upon
property and upon persons. No classes were exempt, yet
some could commute into a money payment or hire some
one else to perform the service. The tax upon salt really
amounted to a direct tax, since it was stipulated how much
salt should be purchased for each member in a family.
Poll taxes were used in varying degree. The amount to
be assessed was based upon a number of items, such as
rank, property, and amount of other taxes paid. There
were a number of classes, usually determined on the basis
of ability to pay. Occasionally certain classes, such as
the clergy, were exempt.

Modern Indirect Taxes. The modern fiscal system



144 OUTLINES OF PUBLIC FINANCE

closely resembles the early one. Indirect taxes form a
relatively important place and yield much more revenue
than do the direct taxes. The extensive use of this form
of taxes is easily accounted for. The need for increased
revenues has grown rapidly, while the lack of political
solidarity in the country has been marked. When such
a condition exists it is imperative for the party in power
to conceal the taxes as much as possible in order to keep
the burdens from being felt, and thus prevent dissatisfac-
tion and perhaps rebellion on the part of the constituency.

Taxes upon the consumption of goods still hold an im-
portant place in the revenue system. Some of the more
characteristic objects taxed are wines, liquors, salt, sugar,
and tobacco. The old gate taxes are still maintained by a
number of cities, both for raising their own revenue and
for that apportioned upon them by higher governmental
units. The collection of a tax through a government
monopoly is well illustrated by the French tobacco mo-
nopoly. The government does not own the entire process
of production, but closely regulates and supervises every
step, fixes the rate of pay for the workers and the selling
price of the product.

Modern Direct Taxes. It must not be inferred, how-
ever, that direct taxes do not occupy an important place
in the French fiscal policy. A number of these taxes exist,
and are modified to meet varying needs. The more im-
portant are the taxes levied upon real estate, upon doors
and windows, the business tax, and a combination poll
and building rental tax. Besides these, numerous fee pay-
ments are required, such as for inspection, certification,
licensing vehicles, and similar services.

The importance of the French business taxes will be
taken up in a subsequent chapter. The other direct taxes
are, to a great extent, apportioned taxes. The tax on
land formerly included any assessment of buildings which
was attempted. Later, a separate tax was adopted for
these two forms of property, and a different method of



REVENUE SYSTEMS OF IMPORTANT COUNTRIES 145

levy v/as provided. The door and window tax is used to
supplement the land and building tax, and is an attempt
to raise additional revenue from those who are able to
pay. A large number of windows and doors is considered
as indicative of wealth, and consequently of taxpaying
ability. The combination poll and rental tax is designed
to fall upon what is generally termed personal property,
as well as upon the individual. The poll tax is a definite
amount, and levied upon each individual, with some ex-
emptions. The rental tax represents the elastic feature,
and is large or small, according to the needed revenue,
after the poll tax has been collected.

86. The Prussian Tax System Has Had a Systematic
Development. Most tax reforms have been spasmodic
and have come as the result of necessity rather than of
deliberation. Often changes have been made to lighten
the burden on particular classes of persons who, for the
time being, held the balance of power. It is often neces-
sary to secure revenue, and the most expedient plan has
been the one most generally used, with little thought as
to the justice of the scheme itself, or its relation to other
methods of raising revenue which may be in use. This
characterization is true, to some degree, of every country,
but is less applicable to Prussia than to any other. This
is because a number of students, from an early period,
made careful investigations and calculations as to what
the tax system should be. In framing fiscal measures
the government used either these authorities or people
trained by them. Consequently the fiscal system devel-
oped along carefully predetermined lines and embodies
such ideals of justice as careful study and investigation
would warrant.

Early Revenues. The systematic development just out-
lined does not apply to the early revenues. These rev-
enues existed before studies could be made, and were
secured from any available source. In some parts of the
country the methods in use were crude, while in others, as



146 OUTLINES OF PUBLIC FINANCE

in the independent cities of advanced political and eco-
nomic development, the fiscal system showed much more
regularity. The real need for revenues was felt here, as in
other countries, with the decline of feudalism. Numerous
occasions, such as wars, would arise, in which expenditure
was made distinctly for the common benefit.

Attempts were made to collect the needed funds from
a poll tax, levied upon individuals, but measured by the
income and property of the individual. When these failed
to meet the needs, the officials would often go out and beg
more funds hence the term "bedes," which was applied
to these early revenues. A particular set of "bedes," or
voluntary payments, soon became a fixed charge, while
further voluntary payments were often asked for par-
ticular purposes. It was a system of gradually converting
a voluntary payment into a fixed one. The name "bede"
still remains, though its early significance is lost. Certain
classes were exempt from these payments, but were fre-
quently asked to donate something to the use of the
state.

Early Reforms. When systematic studies began to be
made, agitation for reform arose, and it was not long
before some of the suggestions of the investigators were
adopted. One of the first accomplishments was to de-
stroy the old feudal relationship between the tenant and
the proprietor of land. Many changes were made in the
kind of land taxes and in the method of the assessment.
The final result of the experiments was a tax upon the
net rental of the land.

Throughout the early development the tax on buildings
was included as a part of the land tax. When net rentals
were adopted as the base for land assessments, however,
the taxation of buildings was put in a separate category.
In the cities the rental value of the building is usually
taken as the base for assessment, while in rural communi-
ties a number of factors are considered. Another direct
tax which received wide use, and which has been very



REVENUE SYSTEMS OF IMPORTANT COUNTRIES 147

productive, was the one placed upon industries of various
kinds. Changes in industry necessitated many changes
in this form of revenue. It is rather remarkable that,
since so much of the early funds was secured from these
sources, later all three were given over to the smaller
political units, and the revenue collected was expended for
local purposes.

Consumption and Income Taxes. Consumption taxes
were early used as sources of revenue. They were intro-
duced with the abandonment of the feudal payments,
were placed upon necessities, and were made applicable
alike to urban and rural districts. The administrative
problem proved so difficult, especially in the country, that
it was not long before poll taxes were substituted in all
but a few localities.