8724 part 1 9724
Taxation and Tax Administration as Depicted in Ancient Indian Texts Chandra
Prakash Bhatia 28 Jul 2023
Taxation and Tax Administration as Depicted in Ancient Indian
Manuscripts Four maxims of taxation viz of equality, of certainty, of
convenience and of economy have been prescribed by Adam Smith in his
celebrated book, ‘The Wealth of Nations’ (1776). Most of these canons had
already found a place in ancient Indian texts. Voluntary tax compliance was
stressed. Laws were later complied as manuscripts, prescribing duties of
both for kings & for citizen, highlighting the ethical values. By 4th
Century B.C. system of public finance in India, was quite developed, as is
evident from Kautilya’s Arthashastra, Brahmanical, Jain and Buddhist texts,
which acknowledged ‘Financial planning’ as life-breath of the State. These
ancient texts provided details of ways & means of creating an abundant
treasury (Kosha) that was an inseparable part of seven organs of the state
machinery (Saptanga). Manusmrithi deals with seven organs of the state
like king, ministers, capital, realm, treasure, army and ally. Kautilya
puts the same, albeit in a different order like swami, Amatyas, Janapada,
Durgs (forts), Kosha, Danda, Mitra and Shatru. He changed the previous
order of priority and added a new element viz. Shatru (Enemy). This Article
discusses, sources of revenue, its significance, methods of collection and
its applications, as stated in the ancient Indian texts like Manu Smriti,
Shanti Parva, Shukra-Intisar, Arthashastra and also contemporary
Jain/Buddhist manuscripts, thereby giving the reader an insight into
History of Taxation in India in ancient period.
I. INTRODUCTION You raise the rod of justice and deviants from the
righteous path are restrained at once, disputes get resolved, the weak feel
protected, where wealth abounds kinsmen are not scarce, but you are the
perfect kinsmen to rich and poor alike”– Kalidasa in ‘Abhijnan-Shakuntalam’
In ancient time, after every war a new political order would set in. The
King (usually leader of the winning group) needed financial resources to
carry out his functions and to wage a new war. Apart from war booty, the
ruler had to look for alternative ways, for ensuring steady flow of
revenue. King would persuade citizen to forgo a part of their earnings for
state activities. People had to be motivated to do so. Enactment of law
first arrived in the shape of religious/moral preaching in a series of
duties. Soon it became a privilege of the sovereign to enforce rules with a
right to punish for disobedience. One of the oldest recorded events i.e.
around 6000 years ago, w.r.t existence of taxation is clay cones of Sumer,
with the inscription “There were the tax collectors”. Vedic manuscripts
reveal that it was the business of the state to promote Dharma (religion),
Artha (finance), Kama (social wellbeing in a wider perspective) & Moksha
(liberation from birth cycles). As public finance became more and more
complex, a method of compulsory and quantified contribution was found
necessary. By the fourth century B.C. the system of public finance was
quite developed, as is evident from Kautilya’s ‘ Arthashastra’, the
Brahmanical, Jain and Buddhist texts. Financial planning was acknowledged
by Manu, Kautilya and Shukra as the life-breath of the state. These ancient
texts provide detailed descriptions of the ways and means of creating an
abundant treasury (Kosha), as an inseparable part of the seven organs of
the state machinery (Saptanga). These texts describe the modes of taxation,
with specifications for levying normal and additional taxes, in different
conditions and for different categories of citizens.
II. DESCRIPTION OF PUBLIC FINANCE, PERIOD-WISE a) IN ANCIENT VEDIC TIME
Booty in war was an irregular source. Bali (religious sacrifice) in Rig
Veda means a gift or religious offering. Kalidasa defines this term as a
tribute to the king, procured for the wellbeing and prosperity of the
subjects. Kautilya used this term as one of the sources of revenue from the
Kingdom. Another term, ‘Bhaga’ has been interpreted as octroi duty or land
tax and the share of produce payable to the state. The term ‘Kara’ did not
figure in Vedic literature. It usually meant a general tax on land in shape
of a fixed proportion of the crop and on movables. The term ‘Shulka’ was
more like a toll tax, or a customs duty levied at ferries, passes, roads,
etc. Shanti parva (Mahabharat) quotes ‘Manusmrithi’ and ‘Smirti of
Yājñavalkya’ to give an insight into the administration of taxes at that
time.
b) SHANTI PARVA (of MAHABHARATA) The Shanti parva (Book of Peace), is
the twelfth and the largest of eighteen books of the Indian Epic
Mahabharata. It has 3 sub-books ‘Raja Dharma Parva’, ‘Apad Dharma Parva’
and ‘Moksha Dharma Parva’ comprising 366 chapters. It has several
treatises and fables embedded in it. It dedicates over 100 chapters on
duties of a king and rules of proper governance. The setting of this book
is post-war time, when both sides have accepted peace and Yudhishthira has
started to rule. The theory that “A prosperous kingdom must be guided by
truth and justice” outlined by dying scholar Bhisma and advocated by Vidura
underlines that prosperity can be ensured only through good governance and
protecting rights & justice. Yudhishthira becomes the king, Bhima his heir
apparent, sage Vidura the Prime Minister, Sanjaya the Finance minister,
Arjuna the Defense and Justice minister, and Dhaumya appointed to service
priests and the king. This book also includes a treatise on yoga as recited
by Krishna. Shanti parva has been widely studied as a reference on
jurisprudence and political prosperity. Chapter 58 of Shanti parva
underlines that the duty of a ruler and his cabinet is to enable people to
be happy and act sincerely. Chapter 88 recommends the king to tax without
injuring the capacity of wealth creators. Illustrations like bees
harvesting honey from flowers, keepers of cows drawing milk without
starving the calf or hurting the cow has been given. It has also been
stated that those who cannot bear the burden of taxes, should not be taxed.
Several chapters, such as 15 and 90 of the parva, direct rulers to rule
according to dharma; He should lead a simple life and should not use his
power for luxuries of life. Shanti parva defines dharma in terms of Satya
(truth), Ahimsa (non-violence), Asteya (non-stealing of property), Souchaam
(purity), and Dama (restraint). Chapter 109 of Shanti parva asserts rulers
have a dharma (duty) to help to uplift all living beings. Chapter 267
suggests that judicial staff should reflect before sentencing, that
punishment is proportionate to the crime, to avoid harsh and capital
punishments and to never punish the innocent relatives of a criminal for
his crime. The king had the authority to frame rules of taxation and
tax-collection, as described in Shanti parva. Apart from statecraft (Raja
dharma), it also provides a theoretical framework of taxation in ancient
India. Ancient Indian philosophy expects public finance to be a properly
structured system, benefitting all.
Mahabharata declares: ‘Righteousness is called Dharma. King has been
advised to constantly keep in view all the important aspects of the growth’.
In the words of Bhisma “With a sixth part, making a fair calculation
of the produce of the soil, as his tribute, with fines and forfeitures
collected from offenders, with the other taxes, according to the
scriptures, upon merchants and traders in exchange for the safety granted
to them, a king should fill his treasury”.
“Realizing these, just taxes and governing the kingdom properly, the
king should’ carefully act in such a way that his subjects may not suffer
from want”.
“Never desire to fill your treasury by acting unfairly or from
covetousness. That king who does not follow the scriptures to acquire
riches and religious merit ”.
“Follow the example, O king, of the flower vendor and not of the
charcoal maker, acting thus and satisfying the duty of protecting you may
be able to enjoy the Earth forever”.
“If in attacking an enemy’s kingdom your treasury is exhausted, you
may replenish it by taking wealth from ail except Brahmanas”.
“The. king shares one fourth part of these righteous acts which his
subjects, well Protected by him, perform in his kingdom”. Further, in
Chapter LXXXIII, Rājadharma, Anushasana Parva, Appointment of Ministers and
Counsels has been discussed.
c) IN YAJNAVALKYA SMRITI Yājñavalkya Smriti is based on Manu-Smriti but
is more logical and synthesized. Yājñavalkya of Mithila was a legendary
sage of Vedic India credited with the authorship of the Satapatha Brahmana
(including the Brihadaranyaka Upanishad), besides the Yoga Yājñavalkya.
Yājñavalkya Smriti ordains as under:
“The ruler of men (a king) should be of great enthusiasm, vast aims
(liberal and intelligent), remembering the deeds, serving the elders,
disciplined, endowed with equanimity of good family, truthful in speech,
pure, non-procrastinating, of strong memory, non-lowly, and also non-harsh.
He should be righteous and without bad habits, intelligent, brave and a
knower of secrets, and guardian of his weak points. (He should be)
well-versed in the knowledge of Anviksiki, in Danda-rule (in the theory of
punishment), in Varta (in Economy) and so also in the three-fold sciences
called Trayi ”.
“After having made a gift of land, the King (literally the
lord-of-the-land) should cause a document to be drawn up for the sake of
information of good kings (who will come) in future”. “In every one of
these let him appoint supervisors who are skilful, pure, and experts and
who are active in matters of income and expenditure”.
“Furnishing protection, rising up let him inspect income and
expenditure, personally. After that having looked into cases (awaiting
decision) and having bathed let him eat at his pleasure”.
“The gold brought by his agents, let him deposit in his treasure
chests. After that let him see the spies and then let him send away his
messengers, being attended by his ministers”.
“He takes the sixth part of the virtuous deeds (of his subjects) by
protecting them with justice. Because the protection of his subjects is
greater than all gifts”.
“When not protected, whatever sin, subjects commit from that verily
goes to the king the half because he takes taxes from them”.
“Let him banish the takers of bribes, after having deprived them of
their wealth. Let him settle always in his kingdom the & Srotiyas (by
giving them) grants, titles and hospitality”.
d) MANUSMRITI AND TAXATION “I should imagine the revenue laws of the
ancient Hindus must have been contributed to the sacred compiler by some
very needy finance minister of the day”- James Wilson (referring to Manu
Smriti in his Budget speech, India 1860). Chapter VIII of Manu smriti deals
with ‘Rājadharma’ and incidentally makes a few provisions about taxation
and revenue administration. The subject of ‘Rājadharma’ treated in Chapter
VII of Manu-Samhita is most valuable. It not only deals with the duties of
the king, but also lays down the principles of taxation and points out the
importance of the coercive authority symbolized by the term ‘Danda’. We get
clearer notions of taxation in the Manu smriti than in any other earlier
ancient texts. Written in verse, these Dharma-sutras are the earliest texts
dealing with the duties of the king and the social order and provide laws
of property ownership. Thus, we find that taxation, revenue collection,
public finance and overall financial administration in Manu Smriti is
largely humane, compassionate, and considerate, but at the same time
strict, rule-bound, hierarchical and systematic. Although the date of Manu
smriti has been a subject of considerable debate, it is generally
recognized to be one of the most ancient texts on the principles of
governance in India. Kautilya himself acknowledges to have drawn from it
extensively in his book ‘Arthashastra’. The overall principles of taxation
in Manu smriti are given in Chapter 7. Taxation should enable the king to
perform his functions and should enable traders and economic agents to
produce and retain adequate fruits of their trades. The Manu-Smriti states
basic principle of taxation as follows: –
“Considering the protection of that which is already there, and that
which is to be increased, the King should levy tax on his traders.”
K RAJARAM IRS 8724 9724
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