The History of Tax Liens - Tax Liens in Ancient Civilisations And now
The secondary market of tax collection is a practice that has been adopted for thousands of years, by government intent on securing a stable income, in order to fund public expenditure. The involvement of private individuals in the process has often been the source of outcry amid the public, as the entrepreneurial flavor of privatization was found wanting astride the exercise of tax administration.
The tax lien investor of today is not a revolutionary, for the practice of selling the right to collect taxes to a third party has been a tried and tested administrative policy of ancient civilizations.
Tax Liens in Ancient Civilisations
In the predominantly agricultural economies of Ancient Greece and Egypt, governments regularly auctioned tax liens to the highest bidder, in order to provide definite revenues in the face of unpredictable crop yields.
To Ancient Rome this kind of tax farming led to the development of the societas, which were partnerships created solely for the provision government revenue streams by the purchasing of tax collection rights.
Such tax collectors, known as publicani, resorted to questionable means in the manner of carrying out their duties, and were often found to have overestimated crop sizes, and unconscionably added charges in order to procure personal benefit.
Eventually, to combat this corruption, Caesar Augustus implemented sweeping tax reform and instituted a fixed rate property tax and a poll tax.
Public Outcry against Debt Collectors
English governments continued to finance their operation by selling tax collection rights through Italian banking syndicates in the 13th century, and although they eventually abolished the practice for public outcry, it was Queen Elizabeth I who reinstated the farming of taxes in prioritization of State revenue needs.
Rising government debt found justification for the practice, through the predictable income stream tax farming afforded, the efficiency of private enterprise in collecting taxes, and the concept then in its infancy, of ‘deficit financing’, where the government was able to borrow against the value of the taxes owed to it.
Tax payers resented the resulting lack of accountability for the levying and enforcement of taxes and this added fuel to the fire of the English Revolutionaries in 1642.
The colonization of the Americas saw tax farming continue in the United States with limited use. In the 19th century, a public official such as the sheriff was employed for the task, but often independent contractors were paid a commission to collect taxes on behalf of the authority.
For a time, authorities used the services of ‘tax ferrets’ or ‘tax inquisitors’, to identify property that taxes were owing upon, and as this practice was the subject of much condemnation, the approach adopted today has been the case for quite some time.
History has taught us that the ethics involved in the administration of tax cannot be maintained unless it is applied by public officials under oath.
References:
Jones, A.H.M. The Roman Economy: Studies in ancient Economic and Administrative History, 1974
Brunt, P.A. Social Conflicts in the Roman Republic, 1971
Badian, E. Publicans and Sinners: Private Enterprise in the Service of the Roman Empire, 1972
Love, John R., Antiquity and Capitalism: Max Weber and the Sociological Foundation of Roman Civilization, 1991
Kaeuper, Richard W., Bankers to the Crown: The Riccardi of Lucca and Edward 1973
Braddick, Michael J. The Nerves of State: Taxation and the Financing of the English State 1996
Ashton, Robert The Crown and the Money Market 1960
Tanner, English Constitutional Conflicts of the Seventeenth Century 1603-1689 Cambridge UP, Cambridge, 1962
Jones, Frederick Robertson History of Taxation in Connecticut 1636-1776, 1896
Jensen, Peter Property Taxation in the United States 1931
Angell, E.A. The Tax Inquisitor System in Ohio, 1897
Brindley, E. History of Taxation in Iowa 1911