difficulties of assessment in England are well known: they are ten times greater in India; and the accumulated wealth which supplies the sources of a great income-tax in England is comparatively wanting in India. Hence the yield in the latter country has been disappointing; nor, in fact, has any very systematic attempt been made to grapple with the difficulties of assessment. There has been continual hope that the tax was but a temporary expedient, and it has been collected as a kind of war-tax by a sort of rule of thumb as the local officers and administrations could best manage. Mr. Laing, followed very much in Mr. Wilson's footsteps, but expressed an opinion unfavourable to the financial success of the income-tax. In the time of his successor, Sir Charles Trevelyan, the income-tax was abolished, the five years for which it was originally imposed having then expired. It was partially replaced by an extended license-tax on trades and professions. The objection to this was that it taxed the middle and poorer classes of tradesmen and artisans, but not the very rich; and though it was eventually extended upwards so as to include heavy payments by merchants, professional men, and public servants making large incomes, it was still open to the objection that it left free those who of all others seemed the fittest subjects for taxation-the possessors of realised pro Thus it appears that our ordinary revenues being set against our ordinary expenditure, a deficit of about three millions results, and that is the deficit which seems to be chronic, and which we have been struggling to meet by increased taxation. That struggle has been going on ever since the days of the mutiny. Our financiers have repeatedly changed their front and their plans. An entire change in the mode of meeting the deficit has, in fact, been made in the current year, and the present arrangement is avow-perty and capital. The result of farther disedly temporary, a fresh expedient being promised. The whole question of additional taxation being thus so completely open, it may be well here briefly to review the efforts which have been made since the mutiny. The enhancement of the salt-duties, bit by bit, to the present high rates was one of the measures adopted; but as we have already reckoned that increase, as well as the tension and increase of the commercial and judicial stamps, nothing more need be said on those subjects. After a comprehensive review of the finances of India, Mr. James Wilson gave the weight of his authority to increased Customs duties, by which the duty on cotton goods-twist and piece goods alike-was raised to 10 per cent.; and he imposed an income-tax on all incomes above a certain point, to be supplemented by a trades' license designed to catch the smaller traders. We have since reverted to nearly the former Customs rates, and thus the income-tax and trades' licenses have alone remained; the subject of continual discussion and of combined or alternate use. Of the income-tax it may be said that it was almost exactly copied from the English income-tax, the law which imposed it being for the most part borrowed from the English Act. The cussion was to reimpose the income-tax last year at a light rate of 1 per cent., the idea being that so light a rate would be little felt, yet would afford the means of levying larger contributions in case of great public emergency. This year there has been no political emergency; but the chronic character of the deficit has been brought ex-strongly to light, creating a financial emergency which Lord Mayo and Sir Richard Temple have met by a great increase of the income-tax to an aliquot part of the rupee, equal to about 31 per cent. It has been declared by the members of the Government that they will feel bound to make some more satisfactory arrangement in the future; but meantime the measure has called forth the loud complaints and fierce denunciations of which we have heard so much. During the past year it was found that, with such improvements in the mode of assessment as the Indian Government has been able to ef fect, a 1 per cent. income-tax yielded about. 700,000l., and Sir R. Temple calculates on getting, at the enhanced rate, something over two millions. The Government has also somewhat reduced the military expenditure, and retrenched a large portion of the usual expenditure on public works. By these means it hopes to get rid of the deficit, and to show an equilibrium of receipt and expenditure at the end of the present year, and to devise by that time more permanent measures of relief. Such is the present phase of Indian finance. Before attempting to form some estimate of the incidence of taxation, it is first necessary to notice the relative value of labour and money in India, as compared to the standards to which we are accustomed. We are apt to over-estimate the wealth of the East. Even when there is real wealth, measured by Eastern standards, Eastern incomes are wonderfully diminished when turned into our money, or applied to the purchase of European commodities and the payment of European labour; and, on the other hand, sums which seem to us comparatively small fall with very greatly increased severity on Eastern taxpayers. We may take the population of British India to be, in round numbers, 150 million souls, or 30 million families-say, five times the population of the United Kingdom. When we come to compare the income of these populations, we may put the matter thus: we may take the wages of an unskilled labouring man in India, in the rural interior, to be about 3d. a day where there is no European or other special demand. In this country we cannot put the wages of unskilled labour at less than 28. a day, everything included; in many parts of the country, if we include house and garden, milk, cider, &c., it is a good deal higher. That makes the proportionate value of labour in this country to labour in India as 8 to 1, and such is about the proportion which all our inquiries have led us to consider to be the best approximate standard for comparing all sorts of labour in England and in India. But the proportion of skilled mechanics earning superior wages is much larger in this country; so that if we take the earnings of a labouring population in this country, compared to equal numbers in India, to be as 10 to 1, we shall probably by no means overestimate the disparity. European labour in India, as compared to the same labour in England, we calculate as three times more valuable. Put the matter practically. Would a professional man, earning 500l. or 1000l. a year in this country, ordinarily go to India for less than 1500l. or 3000l.? The value of European labour in India, compared to native labour in India, is, then, probably as 20 or 25 to 1. If you pay an inferior Native clerk 101. per annum, you must pay a European say 2507. We have taken the earnings of the male head of an Indian family to be 3d. per day. Allowing something for the possible earnings of wife or children, we may say that the income of the family is, on an average, 5 rupees, or 10 shillings, per month, say 67. per annum. Allow for a proportion of skilled labourers at 107. per annum, and we may calculate the income of nearly 30 millions of labouring families, the classes below the incometax, to be 200 millions sterling per annum. Coming to the richer classes, we find that an income-tax yielding at 1 per cent. 700,000l. represents a taxable income of 70 millions. If, allowing for under-assess ments, we take the income of these classes to be 100 millions sterling per annum, that is probably quite a full estimate. Let any one acquainted with India apply that estimate to any particular province. It presumes superior incomes amounting to nearly five times the gross land revenue. If we suppose that the various landholders, above the labouring ryots, derive from the land an income equal to the revenue paid to Government, are there other capitalist classes enjoying four times that income? In a country where the land is so exclusively the source of wealth, there are probably not such incomes, and only by the wealth of the great cities could our estimate be approached. We take it, then, that the total income of the 150 millions of British India-the income of labour and the income of capital together-cannot be put higher than 300 millions sterling per annum. If that be a fair approximate estimate, then the sum drawn from the country by the State will be, even if we exclude the opium revenue, considerably more than 10 per cent. of the income of the people, and probably at least as large a proportion as is raised by taxation in this country. But the main public income the land revenue-although a sum withdrawn from the resources of the country generally, is not a tax on individuals. On whom is it a tax? Not, properly speaking, on the ryots who pay rent, for they have paid it to some superior from time immemorial. Most assuredly not on the landlords, for, so far from being taxed, they have now in the portion of the rent which is left to them a property almost wholly created by our system in modern times. The land revenue is, in fact, but a portion of that God-given value of the land which in other countries has been appropriated by individuals, but in India has been reserved to meet the necessities of the State. Putting apart, then, the land revenue and the opium, we raise by taxes which really fall upon the population of India-that is, from 1. Salt; 2. Excise; 3. Customs; and 4. Non-liti- | 67.; and if we take a labouring man in gious stamps-nearly twelve millions. Let us see on whom this taxation falls. It has been said that the salt-tax is as nearly as possible a poll-tax, salt being consumed by rich and poor alike. The Excise revenue also is almost entirely paid by the poor, spirits being forbidden to the better classes. Of the Customs revenue (principally derived from articles of European production) a very considerable proportion must be paid by the European community in India; witness the large receipts from European liquors. The goods taken by the Natives find a sale in India rather on account of their cheapness than their quality. The, rich Native uses more, as articles of luxury, the fine Native fabrics-shawls, skincobs, and worked tissues of various kinds, and plate and jewellery of Native manufacture. The main Customs receipts are derived from the cheap cloths and threads for light clothing, and copper and brass for pots and pans, and other minor articles consumed by the masses of the people. Even the stamp duties and Court fees fall more heavily in proportion on the petty affairs of small people than on the great transactions of great people; and some of the self-supporting departments benefit the rich at the expense of the poor. Let us take for instance the Post-Office; it is a great benefit to a European officer in the Punjab corresponding with his brother in Madras, or to the Native merchant at Calcutta corresponding with a firm in Bombay, that a letter is carried for three farthings; but to a poor Native corresponding with another poor Native in the next town, the rate is by no means a cheap one. Taking our standard of the relative value of money, the three-farthing rate in India is equal to a sixpenny rate in this country; and the man who should be called on to pay a sixpenny rate for his local correspondence would feel that he not only paid for service rendered, but was heavily taxed. Allowing to the upper class of Natives the larger proportion of the non-litigious stamps, a fair share of the Customs revenue, and a fractional share of the salt and excise, we cannot estimate their payment of ordinary revenue to be much more than one million out of the twelve millions which we have put down as taxation proper. If we attribute to the European residents a special Customs taxation of, say, half a million, there will remain about ten millions paid by the inferior classes beneath the reach of the income-tax. The salt-tax alone, which we have calculated as averaging 38. 6d. per family, is an income-tax of about 3 per cent. on the labouring man's income of Bengal, where the highest salt rate is paid on a full consumption, we shall find that he pays as a tax on the salt consumed by his family about 58. 6d., or nearly 5 per cent. on his income. On the whole, the taxation proper falls at the rate of about 5 per cent. on the total income of two hundred millions sterling, which we have attributed to the classes beneath the incometax; while the one million paid by the upper classes is but 1 per cent. of their estimated income of one hundred millions, and still less, if we suppose, as many do, that their income is larger. Theoretically, then, the income-tax is amply justified by this calculation; and even Sir R. Temple's heavy tax of 3 per cent. would not quite redress the balance or establish full equality of taxation between the rich and the poor. The belief now so generally entertained that the rich Natives do not bear their fair share of taxation seems to be, so far as regards the old established taxes, fully borne out. It seems quite fair that they should be taxed either by an incometax or by some other means. The practical objections to an income-tax are certainly weighty. We have alluded to the extreme difficulty of assessment in a country to which we are strangers, and in which the means of ascertaining incomes are very deficient. And there are farther difficulties. The objection frequently taken to the English income-tax, that temporary incomes are taxed equally with permanent incomes derived from fixed capital, comes out with greatly increased force in India, especially as it affects the Anglo-Indian community. The incomes of Europeans in India, whether they be public servants or private adventurers, are not real permanent incomes, nor even life incomes, such as those of professional men in this country-large incomes are usually enjoyed only a few years, and they are the fund from which provision must be made for a man's after-life, and for his family. An income-tax levied on this temporary income is to a great extent a percentage on his capital, rather than on his income. Add to this that most European incomes are known and taxed to the last farthing, while those of Natives are unknown and supposed to be understated, and we can well understand the especial and not altogether unreasonable bitterness with which the Anglo-Indian community protest against a high income-tax. The rich Natives also, evade it however they may, would of course very much rather not pay the tax, and they very willingly join in the European protests. At the same time, when we hear of the ex cessive unpopularity' of the tax, we must remember that the 'people' who so hate it, and who make themselves heard so loudly regarding it, are principally the Anglo-Indian residents and richer Natives, the latter much under European guidance. The mass of the Native population do not pay the tax, and are consequently not alive to its evils. Assuming that justice requires that the first increase of taxation should fall on the rich rather than on the poor, we fear it must also be admitted that, till India very much progresses in wealth, the taxes on the rich will not be nearly so productive as those on the poor. It has been very much the fashion to suppose the Native merchants and bankers to be possessed of immense wealth, and to presume that the small results of the income-tax, after deducting the receipts from Europeans and public servants, landholders, fundholders, and others of known incomes, imply an estimate of the income of the moneyed classes ridiculously below the truth. Probably the Government does not by the mere haphazard guesses of the assessor arrive at anything like the truth with regard to these incomes, but we venture to doubt if they are really as large as is supposed. If there is this enormous amount of Native wealth where is it? We do not see it in the shape of manufactories, and ships, and various material enterprises which represent the wealth of this country. There are no foreign investments, and comparatively little investment in Indian funds and railways. The joint-stock enterprises are almost wholly European. Where, then, is the untold wealth of which we hear so much? We believe that most of the wealth of Native bankers and capitalists is on paper only-in brief, it is lent to their more needy countrymen. It represents the capital required for the ordinary trade transactions for the supply of the population, and more especially the small capital required for the agriculture of the millions of small farmers. If we trace downwards and downwards the wealth of the millionaire banker, we shall at last find it in thousands of miserable bullocks and such like investments, the working stock of a numerous but very poor people. Granted, then, that it is right and proper to make a commencement of efficient means of taxing wealth, we must not exaggerate this resource. Let us here pause to review shortly the financial position, and try to ascertain how far it is probable that new taxation will be It was formerly supposed that the Indian revenues were somewhat wooden and inelastic. It was said that the land necessary. revenue, being a moderated land rent, could grow but slowly and gradually; that, as the rich consume little more salt than the poor, the salt revenue could only grow with the population; that dram-drinking was not the habit of the people, and it was not desirable that we should promote it; that the Customs receipts, confined to a moderate duty on articles brought from very distant countries, could never be very great; and that direct taxes were abhorrent to the people. The facts, too, seemed to bear out this view. But since the days of the mutiny these opinions have undergone a great change. The figures have shown a rapidly increasing revenue-it has been frequently said without contradiction that the revenues of India have proved to be as elastic as those of England. It has been argued that we may trust to a continuing natural increase which will sub-. merge temporary deficits; that our establishments may be reduced; and, especially, that much of our public works expenditure, such as that on barracks, is not a proper charge on income, but an expenditure of capital for the benefit of future generations which we may well borrow and charge to them. Let us see how far these allegations appear to be well founded. In the first place we may say that the relative value of money in India is steadily falling, and prices are rapidly rising. As money is poured in and goods are poured out, as the communication between the East and the West becomes shorter and more easy, it must be that there is a gradual equalisation of values-the increased production of gold apart. In regard to values, then, there is every reason to suppose that India is in a transition state that great changes are in progress. A rise in prices raises the revenue, but it also raises the expenditure, and the only question is, which side is most affected. Then with regard to the great increase of income which has already taken place, a good deal must be deducted from the apparent increase. A large sum is due to a mere change in the system of accounts, gross receipts being now brought to credit in several departments where net receipts only were formerly credited. We have greatly increased establishments which yield a merely nominal income more than balanced by expenditure, as before explained. Oude and other new territories have been fully brought into account, and have enabled us to round off our salt preventive lines and revenue arrangements. Opium has been for some years exceptionally productive. Additional taxation has been imposed on salt and in stamps, and by income and license taxes. That is a seri So far, too, as there has been real natural | pression is that the Madras ryots already pay increase, this must be borne in mind, that in to Government a larger share of the profits the mutiny war and years immediately fol- of the land than the landholders of other lowing an enormous amount of English provinces, so that we shall not gain revenue money was poured into India. A great war by a new settlement, and must on the other expenditure frequently produces an appear- hand fix the amount for thirty years to ance of prosperity, especially when it is paid come. Annexations of new territory are, for by other people's money. Some 80 mil- by the general concession of the privilege of lions of British capital has, farther, been in adoption, rendered almost impossible except a brief period expended on Indian railways in the event of political convulsions greatly -there was a considerable rush of joint- to be deprecated. Altogether the prospect stock enterprise of various descriptions to- seems to be that for the next thirty years we wards the East-finally, the American War can expect comparatively little increase in caused an enormous influx of silver to pay the source of more than half our real Indian for cotton. You cannot keep pouring in income-the land revenue. continually without something coming out, ous fact to be borne in mind. and much of the increased prosperity and increased revenue of India is no doubt due to the influx of British money-an influx which cannot go on upon the same scale for ever; we shall want repayment, some day, of interest, if not of principal. In fact, with all the boasted increase of revenue, the expenditure has increased faster still, and our present financial state is worse than that before the mutiny. We must not trust to gross figures-let us see the sources of our revenue, and consider how far they are likely to increase. The tributes are fixed, and cannot be increased-on the contrary, some of them have been at various times decreased. Notwithstanding what we have before said regarding the land revenue, it has of late years shown a considerable increase. Oude was not fully brought to account before the mutiny, and has only recently been settled so as to contribute its full quota; investigations into claims to rent-free tenures have been completed, and all dormant Government rights have been brought to book; unsettled estates and items hitherto classed as miscellaneous have been brought into the regular accounts; and, finally, there has been a real increase of revenue in the Ryotwar Provinces of Madras and Bombay; the cotton wealth has added very greatly to the value of land in Bombay; and Madras, without a settlement, yields a steady increase as prices and population increase. But most of these sources of increase are not likely to operate in succeeding years. The land revenue of permanently settled Bengal cannot increase. The other provinces of Northern India have just been settled and fixed for thirty years. In Bombay, the rise in values has been nearly realised by a new settlement at increased rates for a similar period, and very much more cannot be expected. In Madras a settlement has long been ordered the necessary surveys and inquiries must involve great expense-and the general im The salt-tax has been, by successive increases, stretched to its utmost limits. Already there is much reason to suppose that in Northern India a high rate is rendered less profitable by an abnormally small consumption, and increased facilities of communication render the maintenance of widely differential duties very difficult. Of late it has been question of equalisation rather than enhancement of duties; and the last enhancement in Madras and Bombay would have been accompanied by a reduction in Northern India if the financial emergency had not been so pressing. Both justice to the people and financial policy render it clear that we cannot look to any farther rapid increase of the salt revenue. It is now placed quite beyond doubt that the cultivation of opium in China has very greatly extended of late years, and is at present carried on in the western provinces on a very large scale. The only financial consolation has been the belief that the appetite of the Chinese for the drug was also extending so rapidly as to absorb both the Native and the Indian drug; but there was recently a heavy fall in the price of the latter, and weighty opinions, both official and non-official, suggest that the fall is caused by the indigenous cultivation, and that this fall is not only permanent but warns us of the day shortly approaching when the imported opium will no longer be able to bear a heavy duty in competition with the Native article, and our Indian revenue from this source will be lost. There have been repeated alarms on this subject, which have blown over; but the present alarm certainly seems more serious and better supported than those which have gone before, and it must, at least, be felt that our opium revenue is precarious in the future. In excise we have lately somewhat lost revenue by the change in the mode of administration, designed to check consumption, and we cannot calculate on more than |