Today’s national tax systems are in general so complex that it is not particularly hard to find some ways those agents can follow to get around their obligations. This easiness is concerned with the existence of deductions, specific commodities tax or itemized deductions. The more complex the system pretends to be, more prone to the fraud it gets. Therefore public authorities all over the world spend lots of resources not only in the design of tax system but also in managing the tax collection process.
A commonly accepted idea is that there are no first optimal taxation schemes. All the schemes applied until now entail disadvantages of several natures. Probably departing from a no-tax world one might implement a tax scheme that tended to be better than the actual ones, but indeed there are no-tax contexts. Some ideas as flat tax or standard deduction (this last one is actually in practice in US) were built to streamline the fiscal process as well as to avoid tax evasion.
So is this pessimistic view about taxation going to force governments to do nothing on the matter? I am sure the answer is negative and the purpose of this comment is to discuss not an alternative to replace actual tax system but instead to assess the feasibility of an idea which was in fact put into practice two millenniums ago.
About 167 B.C., Roman Empire has extended through a series of conquests. Such extension deteriorated the capacity of central authorities to manage the empire, especially in what concerns the extraction of natural resources in the provinces they were annexing. Those resources would constitute an important source of revenue for the state, however Romans got in troubles to tax that.
That is in this point that Roman history may help us to take some ideas to apply to the context today. Due to the difficulties in controlling taxation over their empire, they created something that has similarities with a private taxation mechanism. The right to collect taxes was passed to the hands of farmers inside each province. Every year the right to collect taxes was auctioned, and the farmers who won the auction – the Publicani – were requested to pay to the authorities their bid (the equilibrium of the auction was exactly the amount that farmers expected to receive in the following year). For a year, they were entitled to collect taxes for their own. In the end, the collectors kept anything in excess of what they bid, with the risk being that they might not collect as much as they initially bid.
Under this taxation scheme, public authorities not longer had to worry about managing the system and to control resources extraction or production once the responsibility of doing this was passed to the hands of Publicani. Even if the bid was lower than the revenue that Romans could potentially do directly, the difference surely was lower than the cost in which they would have to incur in order to make an exhaustive tax collection. By the other hand, Publicani knew much more about the villages, people and welfare than the recent conquerors, so the implementation of progressive tax schemes (already in place in that time) was much more efficient.
Applying this to the actual reality, taxation is a powerful tool in the hand of governments to make redistribution and to provide public goods and services. But in doing this, governments would may pass the responsibility for the ones that can do that at lower cost and much more efficiently. In my opinion, as Romans pretended to do, private collectors can be much more linked to the people and therefore they represent feasible alternatives to the collection by the state.
To conclude, in a world where there are no-tax contexts and therefore all the possible alternatives seem to be not suitable to streamline the disadvantages of actual schemes, the answer may pass not by changing the systems in itself but instead by reducing the costs of doing a collection which is since the beginning a second best option. Therefore it becomes quite obvious that economists should sometimes look at the history…
#86 Diogo Mendes