When two men fought: To tax or not to tax!


When two men fought: To tax or not to tax!

Two men fought in the name of Income tax! One was adored; the other man was deported!

Sir James Wilson was committed for a wrong cause! He fought tooth and nail to bring in an unjust income taxation in India amidst popular opposition.

Governor of Madras Sir Charles Trevelyan, broke all protocols and went public like a people’s leader defying the Queen. It is said that he ‘instigated’ the “great Madras revolt” against the introduction of income tax in India. Quite unheard of in the colonial history! What a brave step by the representative of the colonial master!
He said: ” It is a desperate leap in the dark….The claim of deficit is not true…”. He argued that deficit could be met by reduced spending, even on defence. 

Lord Canning, who was earlier in agreement with Sir James Wilson, later got convinced with the argument of Trevelyan and said: ” Danger for danger, I would rather risk governing India with an army of only 40,000 Europeans than I would having to impose unpopular taxation.” Lord Elphinstone, Governor of Bombay also agreed with Trevelyan. 

Sir Charles Trevelyan was recalled immediately to London for opposing Income tax and was accused of ‘palpable and plain insubordination’. Sir Charles Wood had stated that ‘Sir Charles Trevelyan is an honest, zealous, upright and independent civil servant. He was a loss to India, but there would be danger if he were allowed to remain, after having adopted a course so subversive of all authority, so fearfully tending to endanger our rule, and so likely to provoke the people to insurrection against the central and responsible authority’.

Sir James Wilson won. He ensured that Income Tax bill became a law on July 18, 1860. The bill received the assent of Governor on 24th July 1860. He wrote jubilantly to his daughter in July 1860: ‘ ..for a bad job the best has been made of it, but the task is heavy and I fear a long one…’. Rightly, Simon Commission in 1927 ( about 67 years later) noted: ” …very definite limits to the extent to which an irresponsible government can force increased taxation on a poor country”.

India had an unjust, inequitable, biased and unpopular tax history since ancient India. It continued to be unjust during medieval and British India. Only in the post independent India, Income tax got legitimacy due to its fairness, horizontal and vertical equity and its transformation as an instrument of social welfare. (Read ‘Making People Pay (2010)’ by the author to view the references).

Present day civil servants also need to draw a few lessons from this. Sir Charles Trevelyan represents a civil services ethos that understands the pulse of the people, abound with administrative wisdom and rooted in fiscal prudence. In contrast, Sir James Wilson represents a bureaucracy that advocates impractical, irrational and illogical policies to project their superior knowledge and to please the uninformed masters. Fortunately, we have a strong democracy that is not authoritarian and exploitative like the colonial government and therefore committed leaders and taxmen of Trevelyan’s genre are not snubbed and deported easily.

It was on April 1st, 1962 that Income tax Act – truly an act that is Indian in content and character – was born. Therefore, it would be more appropriate to celebrate April 1st ( Nothing to do with April fool’s Day!) as Income Tax Day rather than July 24 on which an unjust, harassing, inequitable, despotic and discriminatory income tax law was thrusted upon. Nevertheless, a very laudable initiative to declare a day for this – it doesn’t really matter which day is that. Let Income tax Day be an occasion for taxmen to dedicate themselves to the nation to administer the tax laws with fairness, transparency and empathy than to go on an education and PR spree about the utility of paying taxes. Yes, Indians understand the rationale of taxation and they believe in the benefits of the culture of tax compliance. What they don’t understand is the avoidable procedural complexity administered by an unfair and uninformed taxman! Therefore, the Income tax Day should be ideally marked by more events that make taxmen introspect than any artistic or cosmetic outreaches. However, PR actions that are substantive and beneficial with long term implications to taxpayers can add value.

(c) Sibichen K Mathew. Views are personal and purely academic in nature.

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1 Comment so far

Mahendra SinghPosted on11:21 am - Nov 13, 2017

Hi Sibichen.
While surfing aimlessly on the net happened to come across your article on the contest between Wilson and Trevelyan over the shape that economic administration would take in contemporaneous British India.

You have definitely taken sides but have been frugal with the reasons for such bias. Trevelyan, in my view, was a part of the aristocracy, though a career bureaucrat, and was egoistic in having a very high opinion of his own intellect and understanding of the Indian affairs.

Wilson, though well to do, was a self made businessman and acknowledged as an economic mandarin of high standing by Karl Marx. He also founded the Economist magazine, was the founder of what subsequently became the Standard Chartered Bank, brought the concept of an annual government budget to India and audit, introduced the first paper currency issued by the government in India and of course the first Income Tax Act of India – all this over his stint in India of barely nine months.

The compulsion of introducing income tax in India was that the other alternative of increasing the rate of the existing indirect taxes or introducing new indirect taxes was considered inadvisable by Wilson because indirect taxes affect the general population that was by and large poor. He saw the teeming markets and its traders as the relatively well to do persons who could shoulder the burden of 2 to 4 percent income tax that he brought in.

Trevelyan’s objections were to protect his turf as the governor of the Madras which was under threat by imposition of a central income tax. Later when Trevelyan came back to India he made no effort to roll back Income tax. His protest was more of a centre-state dispute rather than on merits of introducing income tax.

I actually find Wilson to be an exceptional individual and Trevelyan just another cantankerous bureaucrat.

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