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ALLAMA IQBAL EXPLAINS: THE THEORY OF TAXATION

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By: ABBAS ALI

A certain amount of the production of wealth is such that it does not go to the possession of the landlord or money lender, nor does it go to the possession of the entrepreneur or the worker. This amount is divided into two parts:

First, the amount that goes to the government exchequer in the form of tax; there is a great difference among the scholars regarding this issue of whether tax should come under the discussion regarding the distribution of wealth or should come under the discussion regarding the consumption of wealth. Should the government be considered the fifth shareholder in the production of wealth, or should we think that some amount out of the shares of the landlord, moneylender, entrepreneur, and worker be provided to the government to strengthen the management of the kingdom? Some scholars say that the government creates wealth, for example, by constructing roads and bridges, and spends capital in other social welfare-related forms. Therefore, in distributing wealth, the government has a right over a particular share, known as tax. Contrary to this, some scholars insist that, in most cases, the government’s capital is spent in unproductive ways. The real purpose of keeping huge armies and fighter planes is not to establish peace in the country so all the nation’s people will remain satisfied and busy in their jobs. Rather, this equipment’s purpose is for the kingdom circle to expand, and the royal family may be strengthened and gain power.

  1. Additionally, paying tax is not a type of exchange of wealth; we pay something happily to the government and get something else in exchange. Rather, the people are compelled to pay some amount of tax. However, the truth is that both parties are on the right path because, on the one hand, the discussion on tax is related to the distribution of wealth and on the other hand, it is related to the consumption of wealth. The new construction of roads, bridges, and other buildings; the inauguration of commercial ports, different methods of imposing tax and the resources for collecting tax; the decision regarding the fact whether any particular land tax comes out of the personal pocket of the landlord or in reality, its payers are those people who use it for producing the output. All these and other such issues come under the discussion of the distribution of wealth. Contrary to this, the good or bad result of the government expenditure comes under the discussion of consumption of wealth. 

Although government taxes have many forms, however, in this chapter, we will mention two main forms, pondering over which is necessary:

  1. Land tax
  2. Income tax

From ancient times, the rule has been practised that the conquers will get some part from the production of the conquered, and in different times, the share of the government has remained different. However, it is an absolute fact that the government has a right to impose particular taxes according to the quality of the land. In our country, after a particular period, the amount of which tends to increase nowadays, an official agreement is signed that the landlords will keep on paying a certain amount of tax, which is known as settlement, and it has two forms:

  1. The first is the Landlordism or Talukaism of districts where the landlord pays the tax, whether he tills the land himself or lets others do it for him.
  2. Districts under serfdom are where the tillers will pay their taxes, and there is no landlord between the government and the tillers. 

Nowadays, in Hindustan, there is a hot discussion about the tax issue among some people of opinion. Most people believe that the real cause of Hindustan’s poverty and misery is that the permanent settlement process was not given expansion. 

Mr. Dutt, who has recently written to the government of Hindustan regarding the important issue, says that due to the permanent settlement in Bengal, there is development in wealth and good luck, and common people have amassed much capital, which can be used in different types of industries. The scholar above’s experience and absolute intelligence undoubtedly carry tremendous value. However, in our opinion, the cause of Bangal’s wealth and good luck is not only the permanent settlement; rather, it has other causes to which the gentleman has not given attention. East Bengal is particularly fertile, and rarely is there a coincidence that there is no rain, as in other parts of Hindustan. Additionally, in the region of Bengal, flax is produced, which is hardly produced in any other part of Hindustan.

Furthermore, in this part of Hindustan, the means of transportation are comparatively perfect compared to other places. Despite all these facts, when there was no rain in one year, Bengal suffered a dangerous drought. Rather, making the settlement permanent in Bengal proved detrimental, as the landlord extracted as much rent as he wished. In this way, the helpless tillers faced unnecessary cruelty. In these circumstances, the government of Hindustan was compelled to protect the rights of the tillers and save them from the cruelty of the landlords. Therefore, to achieve this purpose, the government of Hindustan framed many laws and regulations. Hence, in our opinion, the prosperity of Bengal is mostly due to the geographical qualities of the region.

To some extent, it is due to those regulations which the government of Hindustan has framed from time to time to protect the rights of the tillers. Due to the permanent settlement, people have a discount of Rs 80 lakh annually in the Bihar region. However, despite that, during the previous thirty years, they faced drought twice, and the people could not fight it despite the huge discount. Therefore, it is not correct to say that permanently fixing the amount of tax creates the ability among the people to fight against the drought.

The second important form of government tax is income tax, which is imposed on income.

Most scholars have devised many principles regarding income tax; however, it is not practically beneficial. Therefore, we ignore it. Here, it will suffice to mention that this type of tax is important for the strength of the government’s management. Yes, in principle, income tax has a defect in that the lazy and comfort-loving people do not earn anything; hence, they do not have to pay it, and all its burden falls on that part of the country’s population, which is hard-working and professional business people.

  1. In most commercial countries, there are people whose delicate sense of business identifies the ebb and flow of business. These are neither the business people nor the entrepreneurs, neither retailers nor wholesalers; at times, they neither have huge stocks of saleable goods. Only due to their insight and experience can they know that the price of a certain good will rise or fall at a certain time. Based on this opinion, they generally profit from selling and purchasing goods and sometimes incur losses.

For example, when they perceive that the price of grain will increase in some time, they immediately strike a deal with the grain dealers, and then in the season of inflation, they earn huge profits. A huge quantity of labour production comes to them annually, and because of this, some part of the national wealth goes into the possession of these pseudo-businessmen. Therefore, according to one aspect, if they are the sixth shareholder of the wealth. However, we should remember that the existence of such business people is not harmful. For example, the person who can know with his insight and experience that suppose after four months the price of grain will rise and, based on this opinion, starts buying grain, gives us a hint that to increase the supply of grain, we should import grain. Also, we should use the present stock of grain judiciously. In short, if this form of business remains within appropriate limits, with its help, an equilibrium is established between the demand and supply of goods and the effect of unforeseen changes in the prices of goods is not felt badly. 

Ilm-ul-Iqtisad

Part-4 Chapter-6

Sarkar ka Hisa Ya Maal Guzari

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