Sukhasya moolam dharma, dharmasya moolam artha. Thus goes the philosophy of Kautilya on wealth – ‘righteousness is the root of happiness, and wealth is the root of righteousness’ – as N. S. Mannadiar explains in ‘Kautilya’s Arthasastra: Basics and essence’ (Aavishkar). That explains why Kautilya’s work dating back to fourth century BC gives supreme importance to the maintenance of a rich treasury, the author reasons.
Since the replenishment of the treasury is directly linked to the success of agriculture, industrial production, trade and commerce, and efficient financial management, Kautilya lays stress on the development of these areas, one learns.
His first principle of taxation is that tax should not be a burden to the people; it should be collected just like plucking ripened fruits from a tree. “The rich people with more paying capacity should be made to pay more taxes. Taxes should be levied only once in a year and be paid in cash, kind or labour.”
Agriculture tax
Considering that agriculture was the mainstay of the economy, land revenue was the major source of income for the state. Here, Arthasastra’s prescription is that one-sixth of the agricultural produce has to be paid to government as tax for ordinary lands, and that one-fourth or even one-third for more fertile lands.
“The tax rate is decided by annual assessment of crops at the time of harvest by tax officials and collected at the threshing floor itself. An irrigation tax (one-fifth, one-fourth, or one-third, according to the nature of irrigation) is collected in addition to the land tax, when water from irrigation works is utilised for cultivation.”
Exemptions, concessions
Interestingly, Kautilya speaks of tax exemption for two to five years to farmers who bring dry land under cultivation; and of concessions to foreign traders. On sales tax (vyaji), recovered on every transaction of goods, the rates were 6.25 per cent (for sales by volume), 5 per cent (for sales by weight), and about 9 per cent (for goods sold by counting). “In addition to the several types of fines, which constitute a sizeable income of the state, all commodities like salt, vegetables, flowers, fruits, timber, cattle, asses, liquor etc. are made taxable. Institutions like brothels, guilds of craftsmen and goldsmiths and religious and charitable endowments are also taxed.”
Additional revenues
What appeals to Kautilya is a surplus budget or at least a balanced budget, though he has remembered to delineate various methods to meet contingencies, through ‘additional taxation, donations from the public, appropriation of temple funds and some other fraudulent methods.’
Additional taxation ideas seem fairly straightforward – such as that a farmer has to pay one-fourth of the products and a livestock owner, one-tenth of the cost of his livestock as additional tax – but you can see ruse in ‘voluntary donations.’ For instance, the government would appeal to the public to make liberal contributions under the pretext of undertaking certain important works and the secret agents would be the first to donate huge amounts for the scheme, describes Mannadiar.
“Pointing out their example, others would be coaxed, cajoled or coerced to make similar contributions. Persons who contribute substantial amount would be given titles and honours.”
Dubious methods
As for ‘dubious methods’ to enrich the treasury, the author mentions suggestions such as that ‘an idol of a deity might be installed secretly as if it appeared as a miracle or make a display of abnormal phenomena by contrivance like a serpent with many hoods or idol coming alive and then collect money for propitiating the god or for driving away the evil spirit.’
Conceding that it is paradoxical for Kautilya – who upholds righteousness as an essential quality of life – to come up with unethical measures to generate funds for the state, Mannadiar underlines Chanakya’s caveat that ‘fraudulent methods should be applied only against wicked persons and that too as a last resort.’
Engaging recap of ancient financial wisdom.
Published - November 26, 2010 06:35 pm IST
