MARKETS REWIND | History of Taxation


Cradle to Grave


he word ‘tax’, used for the first time in 14th century, is derived from Latin taxare which implies ‘to assess’. Love it or hate it, tax has become a part of our everyday lives in most economies of the world. The first instance of a proper tax can be traced to ancient Greece where eishpora, a kind of property tax was imposed to raise money for the wars. Countries such as Greece faced numerous wars in ancient times. The system there was unique because there was also a provision to refund any surplus tax. Athens also levied a poll tax every month on foreigners. Those who did not have an Athenian Father or Mother were considered a foreigner. This tax was named metoikion.


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In Rome, the earliest form of tax was the custom duty that was levied on imports and exports. They called it the portoria. Caesar Augustus, who was crowned the Roman emperor after Julius Caesar, was regarded as a successful tax strategist of the Roman Empire. There was a delegation to cities to collect taxes. His reign saw imposition of an inheritance tax aimed at raising retirement funds for the military. This was applicable to all inheritance excluding gifts to spouses or children. This tax came in handy to the English and the Dutch when they instituted their inheritance tax. Julius Caesar had earlier imposed a one per cent sales tax. Augustus increased this to 4% for slaves while keeping it at 1% for everyone else.


February 2016 | www.wealth-monitor.com


The rise of Christianity in Europe and the need to compete with contemporary political powers brought a need to impose taxes. Tax was imposed in South America on agriculture produce and manufactured goods. Taxes at different times and in different countries were paid in kind, cash or gold. During the Renaissance period, states like Venice in Italy flourished and taxes were imposed on trade. Taxes were not always welcomed. Tax regimes also caused unrest and wars. In England, the issue of taxation rights between Parliament and the King led to 1629 Civil War. About a century later, resentment of tax became one of the reasons that caused French Revolution. Taxation was also the reason behind the American War of Independence that led to the formation of United States. With the emergence of industrial capitalism and decline of monarchical


Taxes, though not always welcomed, have been in existence in one form or another at different times across the world since antiquity


powers, the concept of income tax came into being. Such a tax was first introduced in Britain in 1798, on the pretext of funding wars with Napoleon. But it was never taken away.


The role of taxes became even critical after the two World Wars of the 20th century and during the Great Depression. In US, the nation’s entry into Second World War was followed by Revenue Act of 1942 that brought millions into the tax net and widely promoted the culture of tax. The two World Wars were followed by nation-building exercises that required huge funds and taxes played a major role in that. Rising need for public services such as health coverage also banked on taxation and new forms of taxes were devised.


The taxation structure globally has turned wider with time and now encompasses most facets of the economy and industry. Taxes are levied on income, investments, sales, import, export, services and so on. Evasion of taxes is considered serious offence the world over. Many nations have positioned themselves as tax havens as they do not impose taxes on income and investments returns. The taxation system world over has created millions of employment avenues for tax experts who advise firms and individuals on ways to save taxes under specified rules.


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