Gujarat BoardEnglish MediumSTD 11 CommerceEconomicsEconomic Thoughts5 Marks
Question
Explain Kautilya's thoughts on State treasury and taxation policy.
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Answer
Introduction
The original name of Kautilya was Vishnugupta.
Around third century, he accompanied Chandragupta Maurya in establishing a country with strong and prosperous economy based on morality, to end the tyrant rule of last king of Nanda dynasty "King Uhananand".
He was prime minister & was an expert politician.
He gave guidance on various subjects like Politics, law, economics, expert administration, social order, agriculture, industry, state treasury & taxation policy.
According to him, a state should have sufficient treasure for its prosperity, stability, unity and management.
So every state should keep on putting efforts to increase its treasure. A state can easily perform its economic responsibilities if it has sufficient treasure.
It can prepare proper structure for the development of trade and commerce.
Various services like roads, communication, transportation etc. get pace directly or indirectly.
Kautilya's presented thoughts can be very useful for the rules in his policy of state treasure and taxation.
Kautilya's thoughts about State Treasure :
Kautilya kept state treasure on the top in the list of the ways which he suggested for the prosperity of the state.
All the work of the state are dependent on state treasure so he advised all the kings to keep increasing their state treasure.
A state which has enough state treasure can spend proper money for its defense, so it creates greater influence on other state and their by making the state strong and impressive.
Stability can be maintained if a state has proper state treasure.
State treasure helps the state in natural calamities like draught, floods , cyclone etc..
In India many kings opened the gates of their state treasures in such natural calamities.
When a king accepts such kind of responsibilities, it helps in strengthening the bonding between the king and subjects.
State treasure is important to make a state prosperous economically.
Kautilya also suggested to use the state treasure for developing trade, agriculture, industry, transportation and communication system.
He suggested to construct warehouses and dharamshalas $($guesthouses$)$ for facilitating traders.
At that time free trade policy was implemented on large scale.
Inspite of this, tax was imposed on imported goods.
Kautilya also suggested that the government itself should produce some products and make arrangements for sales through government department.
Sufficient state treasure was required by the state so that the king can take the responsibility of social welfare $($Social security$)$.
Every person was protected against starvation.
The main aim of state administration was to distribute funds and food.
Kautilya wished to have complete rule of state over its subjects but his aim was of social welfare.
According to him it was the responsibility of the state to establish religious institutions for the poor and encourages jobs for unemployed persons.
It was the duty of the state to protect poor and weak people. In short, Kautilya was in favour of such a state which was based on social security.
This concept is useful even today for better management.
So it can be concluded that the use administratative expense is required for performing various responsibilities.
Every king should try to gather state treasure in ethical manner.
Kautilya has shown $7$ sources of income for the state, which include :
Towns,
Villages,
Irrigation,
Mines,
Jungle,
Animal husbandry,
Trade and commerce.
He suggested ways to collect state treasure like:
He has emphasized that the king should collect taxes once in a year.
He should not use forceful means to increase the treasury.
It is also advised to refrain from harshness while collecting taxes from regions facing famine and drought.
Kautilya also specified the rates of taxes $($amount of taxes$)$ for various categories of workers.
For example, one fourth of the agricultural production may be collected as tax from individual farmers; one half of the production nay be collected as tax from individual manufacturers of cotton, wool, silk, wax and medicines.
This ray he suggested taxes for other occupations also.
He also suggested on the use of public property, promotion of trade, gifts, penalties, fines and rewards etc.
Kautilya's thoughts about Taxation Policy :
He considered tax as the main source of one of state and in budget, he suggested of taking loan for deficit financing.
He suggested that the den of tax should be implemented in such a way the it should not weaken the condition of tax payers and state also did not suffer loss.
The rich people give more tax so they should be placed higher in society.
Kautilya gave clear principles of taxation which indicate the type of short term and long term tax policies which a state should have; the limits of tax rates which a king may impose and so on. provisions for increasing tax rates during emergencies are also presented.
He laid down such principles of taxation which make the taxation taxes in simple, less expensive and less complex.
In this context, he suggested the following types of a n the tax structure
Land tax :
In ancient time, the king had the rights to collect certain part of agriculture product as tax from farmer or landlord.
This is main source of income of government.
He suggested various measurement scale and standards to collect land tax.
Keeping in mind the type of land, its productivity, form of product, mode and availability of irrigation, Kautilya had devised rules to decide the proportion of taxes.
He also proposed tax exemptions as an incentive to increase productivity.
Import —Export Taxes :
Import-export taxes are classified by Kautilya as:
External charges $($taxes$)$ :
The tax imposed on the material produced in the country is called external tax.
At that time the big rulers used to defeat small rulers and would conquer their territory.
This was called the state of the king.
Internal charges $($taxes$)$ :
For the material produced in the state or the capital.
'Aatlthya' charges $($taxes$)$ :
For the material imported from foreign regions or states.
State had large income of Octroi so suggestions were given for erecting Octroi booths also.
At that time road and property tax were also collected so Kautilya suggested rules for them also.
Kautilya suggested principles of collecting taxes based on the type, shape and importance of product.
He opposed tax evasion and undisclosed properties.
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