Book V, Chapter II, 15

In France, the revenue laws vary from province to province. They require a host of revenue officers to guard not only the kingdom's borders but the boundaries of almost every province, either to prevent the importation of certain goods or to collect particular duties on them, seriously obstructing the country's internal commerce. Some provinces are allowed to pay a fixed composition for the gabelle, or salt tax; others are altogether exempt. Some are exempt from the exclusive right to sell tobacco enjoyed by the farmers-general throughout most of the kingdom. The aides, corresponding to the English excise, differ greatly among provinces. Some provinces are exempt and pay a composition or equivalent instead. In provinces where these taxes operate and are farmed out, many local duties apply only within a particular town or district. The traites, corresponding to our customs duties, divide the kingdom into three broad regions: first, the provinces subject to the tariff of 1664, known as the provinces of the five great farms, including Picardy, Normandy, and most of the kingdom's interior provinces; second, those subject to the tariff of 1667, called the provinces reckoned foreign, comprising most frontier provinces; and third, those provinces said to be treated as foreign. Because the last have free commerce with foreign countries, their commerce with the other French provinces is subject to the same duties as the commerce of foreign countries. They are Alsace; the three bishoprics of Mentz, Toul, and Verdun; and the three cities of Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great farms—so called because customs duties were once divided into five principal branches, each originally farmed out separately though now united in one farm—and in the provinces reckoned foreign, numerous local duties apply only within a particular town or district. Some such duties exist even in provinces treated as foreign, notably in the city of Marseilles. There is no need to explain how greatly both the restraints on domestic commerce and the number of revenue officers must increase when the borders of so many provinces and districts with such different tax systems must be guarded.

Beyond the general restraints resulting from this intricate system of revenue laws, trade in wine—perhaps France's most important product after grain—is subject in most provinces to special restrictions arising from the preference given to the vineyards of certain provinces and districts over those of others. The provinces most renowned for their wines are, I believe, those where trade in wine encounters the fewest restrictions of this kind. The broad market they enjoy encourages careful management both in cultivating their vineyards and in subsequently preparing their wines.

Such varied and intricate revenue laws are not peculiar to France. The little duchy of Milan is divided into six provinces, each with a different tax system for several kinds of consumable goods. The still smaller territories of the duke of Parma are divided into three or four, likewise each with its own system. Under so absurd an administration, only the soil's great fertility and the climate's kindness could keep these countries from soon sinking into the lowest poverty and barbarism.

Taxes on consumable commodities can be collected either by an administration whose officers are appointed by government and answer directly to it—in which case revenue must vary from year to year as the tax yield varies—or they can be farmed out for a fixed rent. In the latter case the farmer can appoint his own officers, who must collect the tax as the law directs but are directly supervised by him and answer directly to him. Farming out a tax can never be the best or most economical way to collect it. Beyond the amount needed to pay the agreed rent, the officers' salaries, and the full cost of administration, the farmer must always draw a profit from the tax proceeds, proportionate at least to the advance he makes, the risk he runs, the trouble he takes, and the knowledge and skill required to manage such a complicated undertaking. By establishing under its own direct supervision the same sort of administration the farmer establishes, government could save at least this profit, which is almost always exorbitant. Farming any substantial branch of public revenue requires either a great capital or great credit, conditions that alone limit competition for the contract to very few people. Of the few possessing such capital or credit, fewer still have the necessary knowledge or experience, narrowing competition further. The very few qualified to compete find it more profitable to combine, becoming partners rather than rivals, and to bid a rent far below the contract's real value when it goes to auction. Wherever public revenues are farmed out, the farmers are generally the wealthiest people. Their wealth alone would arouse public resentment; the vanity almost always accompanying these sudden fortunes, and the foolish ostentation with which their owners commonly display their wealth, arouse it still more.

Farmers of public revenue never consider laws too severe when those laws punish attempts to evade a tax. They feel no compassion for the taxpayers, who are not their subjects and whose universal bankruptcy, if it occurred the day after the farm expired, would scarcely affect their interests. In the state's greatest emergencies, when the sovereign is inevitably most anxious to receive his full revenue, they rarely fail to complain that laws stricter than those currently in force are indispensable if they are to pay even the usual rent. At moments of public distress their demands cannot be challenged. Revenue laws therefore grow steadily harsher. The bloodiest are always found where most public revenue is farmed out; the mildest, where it is collected under the sovereign's direct supervision. Even a bad sovereign feels more compassion for his people than can ever be expected of those who farm his revenue. He knows the lasting greatness of his family depends on his people's prosperity and would never knowingly destroy it for some fleeting advantage of his own. It is otherwise with the revenue farmers: their greatness may often result from his people's ruin rather than their prosperity.

Sometimes a tax is not merely farmed out for a fixed rent: the farmer also receives a monopoly of the taxed commodity. In France the duties on tobacco and salt are collected in this way. The farmer then exacts not one but two exorbitant profits from the people: the profit of farming the tax and the still more exorbitant profit of monopoly. As tobacco is a luxury, each person may choose whether to buy it; but because salt is a necessity, each person must buy a specified amount of it from the farmer, on the presumption that anyone who failed to do so would buy it from a smuggler. The taxes on both goods are exorbitant. The temptation to smuggle is consequently irresistible to many, while the law's rigor and the vigilance of the farmer's officers make yielding to that temptation almost certain to ruin them. Smuggling salt and tobacco sends several hundred people to the galleys every year, besides a considerable number to the gallows. Collected in this manner, these taxes yield substantial revenue to government. In 1767 the tobacco farm was let for twenty-two millions five hundred and forty-one thousand two hundred and seventy-eight livres a year; the salt farm for thirty-six millions four hundred and ninety-two thousand four hundred and four livres. Both farms were to begin in 1768 and run for six years. Those who count the people's blood as nothing beside the prince's revenue may perhaps approve this way of collecting taxes. Similar taxes and monopolies of salt and tobacco have been established in many other countries, particularly the Austrian and Prussian dominions and most Italian states.

In France, most of the crown's current revenue comes from eight sources: the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the tobacco farm. In most provinces the last five are farmed out. The first three are everywhere collected by an administration under the government's direct supervision and direction. It is universally acknowledged that, in proportion to what they take from the people's pockets, they bring more into the prince's treasury than the other five, whose administration is far more wasteful and costly.

French finances, in their present state, seem open to three very obvious reforms. First, abolishing the taille and the capitation and increasing the number of vingtiemes enough to replace their revenue would preserve the crown's revenue, greatly reduce collection costs, entirely prevent the harassment of the lower ranks caused by the taille and capitation, and perhaps leave the higher ranks no more burdened than most of them are now. As I have already observed, the vingtieme is very much like the English land tax. The burden of the taille is acknowledged ultimately to fall on landowners. Since most of the capitation is assessed on those subject to the taille at a certain amount per pound of that tax, most of its final burden must likewise fall on landowners. Thus, even if the number of vingtiemes were increased enough to yield additional revenue equal to both those taxes, the higher ranks might not be more burdened than at present. Many individuals would, no doubt, be more burdened, because the taille is commonly assessed with great inequality on different people's estates and tenants. The interests and resistance of such favored subjects are the most likely obstacles to this and any similar reform. Second, making the gabelle, the aides, the traites, the tobacco taxes, and all the various customs and excise duties uniform throughout the kingdom would make them much cheaper to collect and make its internal commerce as free as England's. Third and finally, placing all these taxes under an administration directly supervised and directed by government would add the farmers-general's exorbitant profits to state revenue. Opposition rooted in private interests is as likely to prevent the last two reforms as the first.

The French system of taxation appears inferior in every respect to the British. In Great Britain, ten millions sterling are collected annually from fewer than eight millions of people, without anyone being able to say that any particular rank is oppressed. The collections of the Abbé Expilly and the observations of the author of the Essay upon the Legislation and Commerce of Corn suggest that France, including Lorraine and Bar, contains some twenty-three or twenty-four millions of people—perhaps three times the population of Great Britain. France's soil and climate are better than Britain's. Its land has been improved and cultivated for much longer and is consequently better supplied with the things that take a long time to build and accumulate: great towns and comfortable, well-built houses in both town and country. With these advantages, we might expect France to raise a revenue of thirty millions for the state's support with as little inconvenience as Britain raises ten millions. In 1765 and 1766, according to the best accounts I could obtain, imperfect as I acknowledge they are, the total revenue paid into the French treasury generally lay between 308 and 325 millions of livres. That is less than fifteen millions sterling: not half what we might have expected if its people had contributed in the same proportion to their numbers as the people of Great Britain. Yet the people of France, it is generally acknowledged, are much more oppressed by taxes than the British. France is nevertheless certainly the great European empire that, after Great Britain, enjoys the mildest and most indulgent government.

In Holland, heavy taxes on the necessities of life are said to have ruined its principal manufactures and seem likely gradually to discourage even its fisheries and shipbuilding trade. Such taxes are slight in Great Britain and have so far ruined no manufacture there. The British taxes that weigh most heavily on manufacturing are certain duties on imported raw materials, particularly raw silk. The revenue of the States-General and the various cities, however, is said to exceed five millions two hundred and fifty thousand pounds sterling. As the United Provinces cannot have more than about a third as many inhabitants as Great Britain, their people must be far more heavily taxed in proportion to their numbers.

Once all suitable objects of taxation have been exhausted, if the state's needs still demand new taxes, they must fall on unsuitable objects. Taxes on necessities of life, therefore, need not discredit the wisdom of a republic that, to win and preserve its independence, has despite its great frugality been drawn into costly wars and forced to incur great debts. Moreover, the extraordinary lands of Holland and Zealand require considerable spending simply to keep them in existence and prevent the sea from swallowing them, which must have considerably increased the tax burden in those two provinces. The republican form of government seems to be the mainstay of Holland's present greatness. Owners of large capitals, the great merchant families, generally have either a direct share or an indirect influence in its government. For the respect and authority this position gives them, they are willing to live in a country where their capital earns less profit if they employ it themselves, or less interest if they lend it to others, and where the modest revenue it yields buys fewer necessities and comforts than anywhere else in Europe. The presence of these wealthy people necessarily sustains some measure of industry in the country despite all its disadvantages. Any public calamity that destroyed the republic, placed the entire government in the hands of nobles and soldiers, and altogether extinguished the importance of these wealthy merchants would soon make it disagreeable for them to live where they could no longer expect much respect. They would move both their homes and their capital abroad; Holland's industry and commerce would soon follow the capitals that sustained them.

In France, tax laws vary by province. Many revenue officers must therefore guard not just the country's borders but almost every provincial border, to stop certain imports or collect duties on them. This seriously disrupts domestic trade. Some provinces may pay a fixed sum instead of the gabelle, or salt tax; others are exempt altogether. Some are exempt from the tobacco-selling monopoly held by the farmers-general across most of the kingdom. The aides, which resemble England's excise duties, vary greatly by province. Some provinces pay an agreed equivalent instead and are exempt. In provinces where the aides apply and collection rights are leased out, there are many duties limited to one town or district. The traites, which resemble our customs duties, divide the kingdom into three large areas. First are the provinces under the tariff of 1664, called the provinces of the five great farms: these include Picardy, Normandy, and most inland provinces. Second are the provinces under the tariff of 1667, called the provinces reckoned foreign: these include most frontier provinces. Third are provinces treated as foreign. Because they can trade freely with foreign countries, their trade with other French provinces faces the same duties as trade with foreign countries. These are Alsace, the three bishoprics of Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and Marseilles. Many duties limited to a single town or district exist both in the provinces of the five great farms and in the provinces reckoned foreign. The five great farms take their name from an old division of customs duties into five major branches, each originally leased out separately, though now all are combined into one farm. There are even some local duties in the provinces treated as foreign, particularly in Marseilles. It is easy to see how much the barriers to domestic trade and the number of revenue officers must grow when each province and district with its own tax system has to be guarded at its borders.

Beyond the general barriers created by this complicated system of tax laws, wine trade faces special restrictions in most provinces. Wine is perhaps France's most important product after grain. The special restrictions reflect the favor given to vineyards in some provinces and districts over those in others. I believe the provinces most famous for their wines will prove to be those where wine trade faces the fewest such restrictions. Their broad market encourages careful work both in growing the grapes and in making the wine afterward.

Complex and varied tax laws are not unique to France. The small duchy of Milan is divided into six provinces, each with a different tax system for several kinds of consumer goods. The duke of Parma's even smaller lands are divided into three or four territories, each with its own system too. With such absurd administration, only fertile soil and a favorable climate keep these countries from quickly falling into the deepest poverty and backwardness.

Taxes on consumer goods can be collected by government-appointed officers who answer directly to the government. Revenue under this system varies from year to year as the tax yield changes. Or collection rights can be leased out for a fixed rent. The tax farmer then appoints his own officers, who must collect the tax as the law directs but work under his immediate supervision and answer directly to him. Leasing out tax collection can never be the best or cheapest method. Besides the sum needed to pay the agreed rent, officers' salaries, and all administrative costs, the farmer must take some profit from the tax revenue. That profit must at least reflect the money he advances, the risk and effort he takes on, and the knowledge and skill needed to manage such a complicated undertaking. By directly supervising an administration like the one the farmer establishes, the government could at least keep this profit, which is almost always excessive. Leasing out any major source of public revenue requires a great deal of capital or credit. That alone limits potential bidders to very few people. Even fewer of those with the necessary capital or credit have the necessary knowledge or experience, further narrowing the field. The handful who can bid find it more profitable to join forces as partners rather than compete. When the contract is auctioned, they then offer a rent far below its real value. Where public revenue is leased out, the tax farmers are generally the richest people. Their wealth alone would stir public anger. The vanity that almost always goes with such newly made fortunes, and the foolish showiness with which these farmers display their wealth, stir even more anger.

Tax farmers never think laws punishing tax evasion are too severe. They feel no compassion for taxpayers, who are not their subjects. If every taxpayer went bankrupt the day after the lease ended, the farmers would scarcely suffer. In a state's gravest emergencies, when its ruler is most anxious to receive every payment of revenue, farmers seldom fail to claim they cannot even pay their usual rent without harsher laws. In times of public distress, nobody can challenge their demands. Revenue laws therefore grow increasingly harsh. The bloodiest laws always occur where most public revenue is leased out; the mildest occur where the ruler directly supervises collection. Even a bad ruler feels more compassion for his people than tax farmers ever can. He knows his family's lasting greatness depends on his people's prosperity, and he will not knowingly ruin that prosperity for a short-term benefit. Tax farmers are different: their own greatness may often result from their people's ruin rather than prosperity.

Sometimes a tax farmer not only leases collection rights at a fixed rent but also gets a monopoly over the taxed product. France collects tobacco and salt duties this way. In these cases, the farmer takes two excessive profits from the people instead of one: his profit as tax farmer and the even greater profit from his monopoly. Tobacco is a luxury, so people can choose whether to buy it. Salt is essential, so everyone must buy a set quantity from the farmer. The presumption is that anyone who did not buy that quantity from him would buy it from a smuggler. Taxes on both goods are excessive. Many people therefore cannot resist the temptation to smuggle. Yet the strict laws and vigilant officers employed by the farmer make giving in to that temptation almost certain to ruin them. Smuggling salt and tobacco sends several hundred people to the galleys every year, as well as a considerable number to the gallows. Collected in this way, these taxes bring in substantial government revenue. In 1767, tobacco-tax collection was leased for twenty-two millions five hundred and forty-one thousand two hundred and seventy-eight livres a-year, and salt-tax collection for thirty-six millions four hundred and ninety-two thousand four hundred and four livres. Both leases were to begin in 1768 and run for six years. Those who value the prince's revenue more than the people's blood may approve of collecting taxes this way. Similar taxes and salt and tobacco monopolies exist in many other countries, particularly in Austrian and Prussian territories and most Italian states.

In France, most of the crown's current revenue comes from eight sources: the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the tobacco farm. In most provinces, the last five are leased out. The government directly supervises and manages collection of the first three everywhere. It is universally recognized that, for what they take out of people's pockets, those first three contribute more to the prince's treasury than the other five, whose collection is far more costly and wasteful.

France's finances, as they stand, seem open to three obvious reforms. First, the crown could abolish the taille and capitation and increase the number of vingtiemes enough to replace their revenue. Crown revenue would be maintained, collection costs could fall considerably, and the trouble those two taxes cause poorer people could disappear entirely. The higher ranks might not bear a heavier burden than most do now. As I have already noted, the vingtieme is much like England's land tax. Everyone acknowledges that landowners ultimately bear the taille. Most of the capitation, in turn, is charged to those subject to the taille as an amount per pound of that tax, so landowners must ultimately bear most of it too. Even if enough vingtiemes were added to replace both taxes, the higher ranks as a whole might not pay more than they do now. Many individuals certainly would, because the taille is assessed with great inequality on different people's estates and tenants. The interests and resistance of those favored taxpayers are the greatest likely obstacles to this reform or any similar one. Second, the gabelle, aides, traites, tobacco taxes, and all other customs and excise duties could be made uniform throughout the kingdom. They could then be collected much more cheaply, and domestic trade could become as free as England's. Third and finally, the government could take direct supervision and management of all these taxes, adding the farmers-general's excessive profits to state revenue. Individuals' private interests are likely to prevent the last two reforms just as effectively as the first.

France's tax system seems inferior to Britain's in every respect. Great Britain raises ten millions sterling each year from fewer than eight million people, without any particular group being clearly oppressed. The Abbé Expilly's Collections and the observations of the author of the Essay upon the Legislation and Commerce of Corn suggest that France, including Lorraine and Bar, has about twenty-three or twenty-four million people, perhaps three times Britain's population. France has better soil and climate. It has been developed and cultivated much longer, and so has accumulated more things that take a long time to build up: large towns and comfortable, well-built homes in both towns and the countryside. With those advantages, one might expect France to raise thirty millions for the state with as little hardship as Britain raises ten millions. In 1765 and 1766, however, the entire revenue paid into France's treasury usually ranged between 308 and 325 millions of livres, according to the best figures I could obtain, though I admit they are very incomplete. That was less than fifteen millions sterling, not even half what one might expect if French people contributed in proportion to their numbers as British people did. Nevertheless, French people are generally recognized as much more burdened by taxes than British people. Even so, France is certainly the great European empire with the mildest and most forgiving government after Britain's.

It is said that Holland's heavy taxes on necessities have ruined its main manufacturing industries and may gradually discourage even fishing and shipbuilding. Taxes on necessities are small in Great Britain and have not yet destroyed any manufacturing industry. The British taxes that weigh most heavily on manufacturing include duties on imported raw materials, especially raw silk. Yet revenue raised by the States-General and the various cities reportedly exceeds five millions two hundred and fifty thousand pounds sterling. The United Provinces can hardly have more than one-third as many inhabitants as Great Britain, so their people must bear much higher taxes in proportion to their numbers.

When every suitable subject of taxation has been exhausted, a state that still needs new taxes must impose them on unsuitable subjects. Taxes on necessities therefore may not discredit the wisdom of that republic. To win and maintain independence, it has had to fight costly wars and incur heavy debts despite its great thrift. The unusual lands of Holland and Zealand also require considerable spending simply to keep them from being swallowed by the sea. This must have greatly increased those provinces' tax burdens. Republican government seems to be the main support for Holland's present greatness. Owners of large amounts of capital, the great merchant families, generally have a direct role or indirect influence in running the government. They value the respect and authority this gives them. For that reason, they are willing to live where their capital earns less profit if they use it themselves and less interest if they lend it. They also accept that the fairly small revenue they can get from it buys fewer necessities and comforts than anywhere else in Europe. Their presence keeps some industry alive in the country despite all these disadvantages. A public disaster that destroyed republican government, handed all administration to nobles and soldiers, and eliminated these rich merchants' influence would soon make Holland an unpleasant place for them to live. They could no longer expect much respect there. They would move both themselves and their capital abroad. Holland's industry and commerce would soon follow the capital on which they depend.