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greater than have ever since existed, and the prevalence of drinking habits was quite as much complained of. The reports of the Chief Commissioners of the Central Provinces and of Assam prove that it is precisely those tribes and races which have been the least accessible to the influences of British rule which are most addicted to intoxicating drinks and drugs. We have at the present day ample evidence on this very point in the conflict between the British and Native excise systems wherever British and Native territory meet. - These are the only points where the British system breaks down, because the restrictions imposed upon manufacture and consumption on the British side of such frontiers are not met by equivalent restrictions on the other side. One of the main difficulties which the excise authorities have to meet is that of excluding from British territory the more lightly taxed and more easily obtained spirit available in Native States.
It is only by strong preventive establishments that illicit distillation can be prevented. The great increase in the revenue does not mark the extension of drinking habits, but is the result of a great and general increase in the rate of tax, which it would have been entirely impossible to realise but for the great improvement in preventive measures which has accompanied it. In fact, the ability of the Excise department to prevent illicit distillation is the only limit which is imposed in practice to increase in the rate of taxation.'
There is hardly a province in British India in which, during the last ten years, there has not been a decrease in the number of liquor shops and in the consumption of liquors.
The next head of Indian taxation is that of Provincial Rates, which I have already mentioned.
In 1859, the year after the transfer of the government to the Crown, Mr. James Wilson was appointed financial member of the Governor-General's Council. The heavy charges incurred in the suppression of the mutinies and the reorganisation of the administration rendered the imposition of fresh taxation
and 500 rupees.
necessary, and in 1860, under the advice of Mr. Wilson, a general Income tax was imposed. It was levied at the rate of 4 per cent., or rather more than 9 d. in the pound, on all incomes of 500 rupees and upwards, and at half that rate on incomes between 200
It yielded in 1861-62 a net revenue of nearly 2,000,0001. Many changes have from time to time been made in the system thus introduced. The direct taxation of incomes has several times been wholly or partially abolished, and several times it has been restored. Sometimes there has been a general tax upon all incomes, sometimes a licence tax on professions and trades, and soinetimes on trades only. In 1877-78 the question of direct taxation was forced into prominence by the necessity of making provision against the financial dangers caused by the liability to famine to which the greater part of India is from time to time subject, Taxes which were called licence taxes, but which were really in the nature of taxes on income, were then imposed throughout India on the commercial and trading classes, and additional rates were placed on the land in some of the provinces. In 1886 a further step was taken. An Act was then passed imposing a tax on all incomes derived from sources other than agriculture. The rates already levied on land remained unaltered, and the licence taxes were removed. This Act affects no income below 500 rupees ; on incomes of 2,000 rupees and upwards, it falls at the rate of 5 pies in the rupee, or about 61d. in the pound ; and on incomes between 500 and 2,000 rupees at the rate of 4 pies in the rupee, or 5d. in the pound. The poorer classes are not touched. An income of 501. a year seems very small to us in Europe, but to a native of India, in his own country, it is almost as large an income as 5001. would be here. I hope it may
now be assumed, after many years of contest, that an income tax has been finally accepted as a permanent source of revenue in India. The amount yielded by the income tax in 1886-87 was 1,355,0001.
There is no country where a general tax upon incomes is more just than in India ; but there has been much difficulty in imposing and maintaining it, because it has been opposed by the richest and most powerful classes, who alone can make their voices heard. It has long been a reproach to our administration that they have borne no fair proportion of the public burdens. The official classes, in the absence of direct taxation, contribute almost nothing. The mercantile and professional classes derive, from the security which they enjoy, greater benefits from our government than any other part of the community, but they have paid almost nothing for its support, except when direct taxation has been imposed upon them. Even the land, although it provides so large a portion of the public revenues, sometimes fails to contribute anything like an adequate amount ; the most notorious example of this fact is seen in Bengal, where the zemindars, the richest class in the richest province of the empire, not only, in consequence of the mistakes of the last century, pay an altogether insufficient sum as land revenue, but remain in great measure exempt from taxation. Much has been said about the unpopularity of an income tax in India. It is undoubtedly disliked by those who have to pay it; but out of the 200,000,000 people in British India, less than 300,000 are liable to the tax, and no such term as unpopular can reasonably be applied to it. I do not undervalue the fact that the small minority on which the income tax falls is politically the most influential section of the whole community, but its discontent is a lesser evil than the injustice of allowing it almost entirely to escape taxation.
The revenue under the head of Registration is not very important in amount. It is derived from fees levied on instruments brought for registration; in some cases, when immovable property above a certain value is affected, the registration of documents is obligatory, in other cases it is optional,
I have gone through all the heads of taxation except Customs. I propose to give in some detail thu history of late legislation on this subject, because a nearer approach to complete freedom of trade has heen made in India than in almost any other country, and the results have been extremely important.
Until 1860 nearly everything imported into India was taxed at the rate of 10 per cent. ad valorem. On some articles the rate was much higher. Almost everything exported paid a duty of 3 per cent. In 1864, the general rate of duty on imports was rednced to 73 per cent., and in 1875, under the Government of Lord Northbrook, to 5 per cent. Many exemptions from export duty were made from time to time, and in 1875 the only exports still taxed were rice, indigo, and lac.
The application to the Indian customs tariff of free trade principles might have been long delayed but for the fortunate accident that the interests of a great British industry were affected. Cotton goods were among the articles on which import duties were imposed. The English manufacturers complained loudly that the practical result was to levy a protective duty to their detriment in favour of cotton manufactures rapidly growing up in India. After a long and acrimonious discussion, the question at issue so far as the principles at stake were concerned, was decided on May 31, 1876, in a despatch to the Government of India from the Marquis of Salisbury, who was then Secretary of State for India. He showed that there was no conflict between the interests of India and of England, and that while the abolition of these duties would give legitimate relief to a great British industry, it was a measure still more urgently required in the interests of India. He said that while the duties had the effect of checking the import of British manufactures, they were at the same time exposing to future injury an Indian industry which it was of the first importance should rest upon sound foundations, which there was every reason to believe would rapidly increase, and which ought not to be allowed to grow up under influences which experience had shown must be injurious to its healthy and natural development. “Whether (he wrote) the question be regarded as it affects the consumer, the producer, or the revenue, I am of opinion that the interests of India imperatively require the timely removal of a tax which is at once wrong in principle, injurious in its practical effect, and self-destructive in its operation.'
In the following year (July 11, 1877), a resolution was adopted by the House of Commons, without a division, that the duties now levied upon cotton manufactures imported into India, being protective in their nature, are contrary to sound commercial policy, and ought to be repealed without delay so soon as the financial condition of India will permit.'
Famine and other causes of financial difficulty prevented immediate action, but in the financial statement, March 1878, an important step not only towards the abolition of the duties on cotton goods, but towards the