Land Taxation in Asia: An Overview of the 19th and 20th Centuries

Abstract

Most studies of land taxation in Asia have found that its importance has declined over the 20th century, as a proportion of total government revenues and often in absolute terms. In fact, this decline started well before 1940 in most colonial territories in Asia, as well as in Japan. The paper explores the reasons for this decline in the context of several former colonies in Asia, including British India, Indonesia, the Philippines, Taiwan and Korea. The paper also examines why attempts to revive land taxation, especially in rural areas as a source of revenue for sub-national governments, have often been disappointing, and draws some lessons for future policies.

Notes

¹ See the quotation from Lord Salisbury in Stokes (1978, pp. 118–119).

² Kalecki (1954) was an early exponent of the view that the flow of food from the agricultural sector might be slower than was needed to keep prices stable in the non-agricultural sectors, at least partly because, as rural populations grew, more food would be consumed within the agricultural sector.

³ Reforms were made to the land taxation system in Java by T. S. Raffles, during his period as Lieutenant-Governor from 1811 to 1816. An analysis of the influences on his policies is given in Bastin (1954).

⁴ The Permanent Settlement was an agreement, finalized in 1793, between the East India Company and Bengali landlords to fix revenues raised from land in perpetuity.

⁵ There was some attempt to prepare cadastres and levy the land tax in the southern part of what became the province of South Sulawesi after independence.

⁶ For a discussion of the riots in Central Sumatra in the mid-1930s, see O'Malley (1979).

⁷ It should be noted that Kimura (1989, Table 5) reports that in Korea land taxes accounted for a much larger percentage of total government revenues than is shown in Table 1, especially before 1930. The difference could be explained by different definitions of both land taxes and total government revenues.

⁸ Attempts to impose a land tax in urban Bangkok also failed, mainly because of government fears that it would unduly penalize ethnic Thais, who would be forced out of the city (Larsson 2012, p. 77).

⁹ These figures are taken from Central Service of Statistics (1940, pp. 275–279).

¹⁰ Roy (1998, pp. 341–342) gives a brief review. A good discussion of the complexities of estimating the fiscal burden on Indian agriculture in the 1960s can be found in Gandhi (1969).

¹¹ Hicks (1961) gives a comprehensive discussion of the case for “development from below”. A more recent argument along these lines can be found in Bird & Slack (2008, pp. 120–122).

¹² Skinner (1991a, p. 131) argued that land taxes are unpopular with farmers because they are explicit rather than implicit. Farmers were often unaware of how much tax they were paying through, for example, export taxes or excises, while they received an annual demand for the land tax.

¹³ Proponents of export taxes in countries such as Thailand and the Philippines often argued that these countries were major exporters of products such as rice and coconuts, and could therefore pass most of the tax on to foreign buyers through their market power. In fact, the evidence on domestic supply elasticities and foreign demand elasticities for most export crops in Southeast Asia suggests that this was not the case and that in effect most of the incidence fell on domestic producers. For further discussion in the Southeast Asia context, see Booth (1980, pp. 40–46).

¹⁴ Gandhi (1969, p. 25) argued that the Indian government over the 1960s reduced subsidies on agricultural inputs while at the same time state governments reduced or even eliminated land taxes. In some parts of Southeast Asia, especially in Indonesia, fertilizer subsidies were increased over the 1970s.

¹⁵ For a discussion of decentralization debates in Indonesia from 1949 to 1999, see Booth (2011).

¹⁶ These figures are taken from successive volumes of the Taiwan Statistical Data Book; a time series of the land tax as a percentage of total government revenues is given in the Taiwan Statistical Data Book (2001, p. 183). After 1988, the government of Taiwan suspended the tax on agricultural land in order to encourage agricultural production, so the land and property taxes were derived entirely from non-agricultural land and property (Tsui 2008, p. 134).

This paper was prepared for the Panel “Development arrested: property taxes in the XIX and XX centuries”, XVIth World Economic History Congress, Stellenbosch, July 2012. Comments from participants in this panel and also from participants in the History and Economic Development Group in London and two referees have been very helpful in revising the paper.