November 14, 2009

History of Taxation, Section 2: Taxes and Ancient Greece

W. Marc Gilfillan

W. Marc Gilfillan, CPA, NC, individual and business CPA and Tax expert, shares about the history of taxes…

The Greeks had two ways of taxation. One was liturgy, where wealthy citizens unselfishly contributed more to the government than they were required to. The second system was named “tax-farming,” which had an extended and colorful history. Tax farmers were private citizens who bid at public auctions for the right to gather a specific tax, for example, a a tax on ships, a tax on inns, or a sales tax. With precise records from prior years, and excluding some calamity, the amount of tax revenue expected could be accurately calculated. The business was risky, but appears to have been profitable. In the city-states, tax farming seemed superior to government tax administration. The private man did a better and more economical job of collecting taxes.

The right to collect taxes is a huge delegation of sovereign power. But considering that taxes were low in Greek city-states, tax farming wasn’t a very large enterprise. To the Greeks, it was a simple efficient method of collecting taxes in a system in which tax evasion was not worth the effort. The most serious abuses of the system came from the tax farmers.

The modest method of tax farming, at first set up by the city-states, contrasted strongly with the system of the later Greeks in the 3rd to 1st century B.C. We see accounts of how the world twisted under the extreme oppression of the tax farmers. And this was before the Romans were around! The Greek democrats who created tax farming would have been disgusted to see that in a few hundred years their small private collection method had evolved into a monster of oppression. They would have been even more astounded, perhaps, to learn that tax farming flourished in Western civilization, in many bizarre methods, for 2,500 years, eventually going out of style in the early 1900’s. Go here if you want help with modern-day Tax Preparation, bookkeeping, and payroll in Raleigh NC

Greeks were pillars of civilization in the ancient world and had an interesting take on taxation and government. The Greeks said that the liberty and freedom of a society was most accurately measured by its tax system. We, 2,500 years later, are less profound in our analysis of taxation. We seem to accept any tax adopted by our legislators. We let class politics create tax legislation. And we let legislators tax just about anything they want in any way they desire. If you’re feeling the pressure with today’s taxes, call a Raleigh NC CPA for all your tax-related needs!

Overall, the bright spot in the Greek story was in their administration of tax. Tax revenue was assessed and administered by the taxpayers themselves, without the intervention of a gigantic government bureaucracy. Even more important was the response of the rich to the needs of the community. They spread their wealth with the community and didn’t hesitate to see that the city and its people benefited from the bounties bestowed on them.

The Greek view was simple – taxes are tyrannical, and hence illegal, if they are demanded by arrogance and compulsion. They are justifiable when based on reasonableness and loving care. We have retreated a great distance from those lofty ideas.

Keep an eye out for W. Marc Gilfillan’s next chapter in his History of Taxes series: Taxes and The Rosetta Stone.

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