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Kautilya on principles of taxation

Balbir S. Sihag (Department of Economics, University of Massachusetts, Lowell, Massachusetts, USA)

Humanomics

ISSN: 0828-8666

Article publication date: 20 February 2009

1771

Abstract

Purpose

The purpose of this paper is to present Kautilya's principles of taxation during the fourth century BCE.

Design/methodology/approach

Modern tools of economic analysis are used to present Kautilya's principles on income taxation.

Findings

Kautilya implicitly suggests a linear income tax. He emphasizes fairness, stability of tax structure, fiscal federalism, avoidance of heavy taxation, ensuring of tax compliance and subsidies to encourage capital formation.

Research limitations/implications

According to Kautilya, some linkage between the ability to pay (i.e. provision of a safety net to the poor, old and the sick) and the benefit principle may be better than the current approaches, which treat the ability to pay and the expenditure side of the taxation separately.

Practical implication

Ensuring tax compliance and avoidance of heavy taxation are the most important ingredients of a sound fiscal policy.

Originality/value

The paper presents the very first growth‐oriented fiscal policy along with a provision of a safety net.

Keywords

Citation

Sihag, B.S. (2009), "Kautilya on principles of taxation", Humanomics, Vol. 25 No. 1, pp. 55-67. https://doi.org/10.1108/08288660910934772

Publisher

:

Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited

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