Popular Science Monthly/Volume 49/July 1896/Principles of Taxation: In Literature and History IX

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Popular Science Monthly Volume 49 July 1896 (1896)
Principles of Taxation: In Literature and History IX by David Ames Wells
1233692Popular Science Monthly Volume 49 July 1896 — Principles of Taxation: In Literature and History IX1896David Ames Wells




JULY, 1896.






THE Tax Experiences of India.—In contrast with the record of tax experiences in Egypt, that of India under like (British) influences, though equally singular and instructive, is not equally satisfactory. The elements of the problem of raising sufficient revenue to defray the expenses of the state since India passed under British rule and influence are substantially as follows:

A vast area of territory—1,609,151 square miles—with a population comprising more than one fifth of the human race—288,159,692 in 1891—and increasing at the rate of at least 30,000,000 for every decade, a number about equal to the present population of England and Wales; without homogeneity, but divided and subdivided, as is the case in no other country, by diversity of race, religion, caste, and language.[1] Of the population of India, 217,000,000, according to the census of 1881, were unable to read or write; while as respects property, the testimony of recognized authorities in 1877 was, that the value of the total yield of the land of India from all sources, including the produce of mines and the animal value of manufactures, would not average more than forty shillings (ten dollars) per head for the entire population.[2] As compared with Egypt, the situation in India has this marked difference—namely, that whereas in the former country the extreme poverty of its rural population—the fellahs—has not been due to any lack of fertile land, or any incapacity on their part for obtaining from it a comfortable subsistence with continued betterments in condition, but owing to the fact that they have from time immemorial been deprived of the control of the fruits of their labors; while in India the population is increasing so rapidly—especially under the conditions of peace which have been attendant on British rule—and so disproportionately to the amount of new and fertile soil that can be appropriated, as to leave but little margin, under existing methods of cultivation, for increasing the moans of subsistence for the people. In fact, the "Malthusian theory" is completely exemplifying itself in India, which is densely populated, destitute in a great degree of roads and of the knowledge and use of machinery.[3]

In a debate in the British House of Commons on the Indian budget, in August, 1894, Mr. S. Keay, an ex-official of the Indian Government, stated that in 1892 "he had a census taken of five villages in the presidency of Bombay. The population was 236. These five villages farmed 1,400 acres, the gross crop of which was valued at £193. If a starvation support of 14 shillings a year were allowed to each of the 236 persons and 11 shillings a year for each pair of bullocks kept to till the farm, the net produce of the five villages amounted to £5 for the year. Yet in the same year they paid to the inland revenue £73, and the village books showed that it was done by borrowing from the usurers at 24 per cent."

Mr. Keay further stated that "about seven years ago the Director-General of Statistics for all India published a book in which he stated that 40,000,000 of the people of India habitually went through life on an insufficiency of food. The Government of India wanted to be able to deny the statement, and they sent a confidential circular to the heads of departments and governors, in which they asked whether it was wholly or partially true, not that 40,000,000, but that the greater proportion of the population of India suffered from an insufficiency of food; and they directed that men of 'experience and judgment' should be set to make the inquiries. The replies were contained in five confidential Bluebooks. In the district of Rampoor twelve scattered villages were taken, with a total population of 2,000. Of these, 1,600 were cultivators, and the remaining 400 were laborers, artisans, etc. It was found that, after deducting rent and the cost of cultivation, the cultivators had available for their support during the year sixteen rupees each, while the laborers had seventeen shillings a year each as the whole means of their subsistence. In another case it was shown that in a district having a population of over 1,000,000 souls, 173 persons had only thirteen shillings a year each to live upon. In another district the official reports which were contained in Blue-books marked 'confidential' showed that in a large district nearly all the inhabitants had to live upon from three eighths to three quarters of the amount of grain which was ascertained to be the minimum that would support a healthy condition of life."

In the debate that ensued, Sir Richard Temple, another ex-official of India, stated that "the calculations referred to by Mr. Keay were not worth the paper they were written on or the breath with which they were uttered. The data upon which they were founded were supposititious, and the deductions drawn from them were impossible. If they were true, the people of India would not be living at all, and the land would be of no market value. Yet, in another breath they were told that large sums of money were being advanced by local banks on security of the land."

Mr. Keay said that the facts and figures were quoted from the Blue-book.

Sir R. Temple retorted that "the facts were no facts at all. The tabular statements were merely tabular statements of particular theories of particular calculators. They were, in fact, delusions and snares. He preferred to take certain general facts which could be tested. He could not know or test how a particular family in India lived. He did, however, know the area of land under cultivation, the population of the country, the ratio of the increase in the population, the expansion of trade, and, above all, the exportation of foodstuffs. Honorable members told them that the people of India were starving, yet India exported food and grain stuffs to such an extent as to threaten disturbance to the markets of Europe, and particularly to disturb the markets of this country [England]. Honorable members told them that the people of India were sinking, yet the population had increased by 30,000,000 in ten years—a greater increase than in almost any other country. No doubt the taxable capacity was low, but he asserted that the people of India were, as to the poorer classes of the population, the lightest-taxed people in the world. The actual value of the produce of one man's land was difficult to test, but the rate of wages was easily ascertained. The poorest laboring man in India could, at the time when he was in India, earn Rs. 5 per month, and he would not pay more than Rs. 2 per annum in taxes.[4] A man here earning thirty-five pounds a year would not pay less than two pounds in taxation. This meant that in England the poor man paid one seventeenth, while in India the poor man paid only one thirtieth in taxes. Therefore the taxation of India was relatively much lower than in England. How could a people who were exporting such quantities of foodstuffs and who were increasing so greatly in population be said to be dying of starvation? In face of those facts, which could be proved, what weight was to be given by the House to amateur statisticians and their calculations? He had spent twenty-five years among the poorest people in India, and he had also spent fifteen years among the active life of the poorest people of this country. With that experience he asserted that the people of India were not so poor as the people of England." (London Times, August, 1894.)

It was evident, therefore, from the outset that the natural conditions of India were as antagonistic to the adoption of what may be termed the civilized forms of taxation, as they were to the adoption of the Christian religion or English habits and language; and the problem to the new rulers for obtaining revenue for the support of their Government, without resort to the old forms of arbitrary exactions or plunder, has accordingly always been one of great difficulty and delicacy; and the record of their experience in attempting to solve it constitutes an exceedingly novel and important chapter in economic history.

Practically the only guide to them for the determination and collection of taxes has been that of expediency. The imperial revenue of British India for 1893-'94, stated in tens of rupees, was £60,193,000, making no allowance for the depreciation of silver. The value of ten rupees is very nearly equivalent to the British pound sterling, or five dollars gold coin of the United States. The ordinary revenue of India for the fiscal year 1893-'94 was, therefore, about $300,908,000. The expenditures exceeded the receipts of revenue to the extent of about $30,000,000, and represented an annual deficit to that extent.[5]

The sources of revenue in India are mainly seven, but all of them, using the term in its ordinary signification, can not be characterized as "taxation."

The first and most important of them is the taxation of land, with which the Asiatic people have been familiar from a most remote period, and the justice of which is least questioned by them. In fact, reliance upon land revenue was a feature of the Indian governments long before England had any control over India. The native rulers maintained themselves for centuries by exacting shares of crops and cash contributions from cultivators of the soil. Taxation of land in India has therefore been retained, and not instituted by the present (British) Government. The entire land of India was nationalized centuries ago, and now as formerly (and as is the case in China) the primary; title to all land inheres in the state or Government, and the cultivators of land pay a certain rent in respect to their tenancy.

There are two methods of land assessment in India, which involve a somewhat curious history. A hundred years ago, under the administration of Lord Cornwallis, an arrangement or treaty was made, which then and forever fixed the rate which the tenants of land in the government of Bengal—representing about one fourth of the present area of British India—should pay the state for their occupancy, and which then was regarded as a fair rental; and although since that arrangement was made, the land in question, owing to increased population, new industries, and state expenditures on roads and railroads, has greatly increased in value, and yields to the representatives of the primary lessees threefold or more rental, the British Government has to this day strictly respected its treaty and fulfilled its agreement. The fortunate controllers of the land thus rented—the zemindars, or native capitalists—having, however, improved their opportunities to oppress (rackrent) their subtenants, the Indian Government, since 1885, has undertaken to remedy this evil, and with a considerable degree of success. Land throughout India is divided into provinces, and the provinces themselves are divided and subdivided in such way that taxation in each locality is under the direction of an officer familiar with all the matters that must be taken into consideration in taxing justly. A multiplicity of rights in the nature of land tenures are recognized in the assessments, and heed is also paid to the character of the lands and the purposes to which they are devoted. No increase of rent is ever allowed upon improvements made by the tenant himself, or upon improvements arising from the expenditure of public money; so that, in the opinion of those who have given personal attention and study to this subject, the English officials have finally established a land revenue system in India on a just basis.

The expense of collecting the land tax is heavy. In the so-called "village assessments" the collection is made by the local authorities. In other cases the large proprietors and notables pay the Government levies and recoup themselves by including their payments in the rents charged to their subtenants—the ryots, or peasantry. While the revenues from this source are very reliable, they are not regarded as capable of much further expansion. The gross receipts—imperial, provincial, and local—from the annual rental of tax on land in all India was officially returned for 1893-'94 at 25,589,600 Rx. (or about $123,000,000), representing an average rent or tax of $1.53 per acre. About nine tenths of the entire population of India belong to the agricultural class.

Second in order of importance of the sources of Indian revenue is the tax on salt, which, since its discontinuance in France in 1789, has ceased to be an excise or internal tax in European countries, with the exception of Italy, and which finds its warrant and justification at the present time in India in the fact, that apart from the land tax there is no other method so practical and economic of compelling the masses of its people to directly contribute anything for the support of the Government, inasmuch as the consumption of salt is a necessity for every individual. A very large proportion of the salt required for Indian consumption is imported—chiefly from England—and the total amount on which taxes are collected is about 500,000 tons, or 3,000,000 barrels. The rate of tax is two and a half silver rupees (nominally $1.00) per maund of 82·28 pounds. Previous to 1879-'80 the Government maintained, at great expense and popular annoyance, a customs line twenty-five hundred miles in length, to keep salt produced in the states under native rule from entering into British territory without the payment of a heavy duty. This barbarous system, necessitating the constant employment of a large force of native constables, known as chuprassies, invested with inquisitorial powers, was abolished at the time above named, by entering into treaties with the native states possessing salt sources, in virtue of which British officials are permitted to supervise their salt works and tax their product before it left them. But this could be only accomplished by paying the states concerned a satisfactory compensation for this concession. The receipts of the imperial (Indian) revenue from the salt tax for 1894 were 8,228,000 Rx. (tens of rupees), or nominally about $41,000,000. The present average annual consumption of tax-paid salt by the people of India has been officially estimated at about ten and three fourths pounds per head, and the average annual burden of the tax on each Indian family of five persons at one rupee and a quarter, or 6d. (ten cents); and in considering this tax it is desirable to bear in mind that there is no direct taxation in India either on tobacco or sugar, so that the salt tax is the only direct tax that the Indian peasant need pay, unless he indulges in alcohol or narcotics—the land assessment being regarded as in the nature of rent.

As the price of salt, by reason of the tax, is somewhat higher in India than in most other countries, the question as to its effect upon its population is one of high social and sanitary interest, in respect to which authorities differ. By some[6] it is contended that the consumption of this prime necessity is thereby greatly restricted, and that much disease, both of men and animals, is thereby engendered; and the trade in salt fish, which might supply a cheap and abundant article of food, is greatly hampered. Others assert that "the poorer classes do not feel aggrieved or complain about it"; that "as a rule the peasantry do not stint themselves on account of it"; and that "no one has ever taken exception to the tax as it stands but the European grievance-monger in the country." But, be this as it may, all are agreed that it would be very difficult to raise a revenue equivalent to that derived from the taxation of salt by any other method.

The third largest source of imperial revenue in India is from the Government monopoly of the production and sale of opium; and the annual receipts from which, although at one time in excess of $40,000,000, have of late years greatly diminished, and were officially reported in 1894 as 6,037,571 Rx. ($33,137,855). As the opium product of India is sold mainly to China and the Straits Settlements, and as the export taxes embodied in its price are collected from the people of these countries, they can not, therefore, be regarded as a fiscal burden upon the people of India.

The method of collecting the revenue from opium is substantially as follows: No person in British India may cultivate the poppy, from which the drug is derived, without a license from the Government; and every cultivator is bound to sell the crude product of his crop to the Government at certain factories, where it is manufactured into the opium of commerce. A portion of the manufactured opium is retained for consumption in India, and distributed through venders licensed by the excise department. The remainder is sold, monthly by auction to merchants, who export it; and on this exportation a duty is levied, from which the imperial revenue from this source mainly accrues. Opium produced in the native states of India pays the export duties when it passes into British territory. The Government prescribes rules for the cultivation of the poppy, and the manufacture, possession, transport, import (from native states) or export, and sale of opium; and any contravention of such rules is subject to stringent penalties. The product of the poppy illegally cultivated and opium made the subject of an offense against the law are liable to confiscation, together with the vessels and packages in which it is found and the animals and conveyances used in transporting it. Notwithstanding all these precautions, the price of opium consumed in the country—about one eleventh part of the whole—is more or less influenced by illicit supplies; so that the Government monopoly of this article is fully effective only in respect to the export trade. But even under such conditions, opium is the most valuable of all the native exports of India; and the annual value of the poppy crop, including the poppy seeds and the poppy oil produced from them (neither of which yield opium), or the annual money return, apart from the Government revenue, that the people of India get out of the crop, is estimated at about $70,000,000.

The fourth source in order of importance of the Indian revenue is from the so-called excise, which embraces licenses and distillery fees, licenses for the sale of liquors and drugs, and rent of "Toddy" trees—364,624 Hx. ($1,722,120) in 1894; duty on opium consumed in India—732,200 Rx. ($3,601,000) in 1894; fines, confiscations, and miscellaneous; total excise revenue for 1894, 5,388,573 Rx. ($26,942,805). The incidence of this form of taxation falls mainly upon Europeans and "Eurasians" (a modern name given to persons of mixed European and Indian blood). In this connection, the Imperial Secretary for India, in his budget speech (1894), stated that, "whereas in England there was a licensed shop to sell intoxicating liquors to every 106 of the population, in India there was only one for selling liquor and opium to every 3,148 of the population."

Fifth. The stamp system of taxation in India yielded a revenue in 1894 of 4,509,355 Rx., or $22,546,665. Although somewhat heavy in the aggregate, the system is not unpopular, for the reason that it is practically unknown to the mass of the people; the largest items of collection being returned, in 1894, under the heads of "court fee stamps" ($15,317,315) and "commercial and other stamps" ($5,841,995).

Sixth. "Provincial rates." Under this title are included a variety of levies, differing in name, character, and rate in different places, and for the furtherance of special objects—as for paying the expenses of hospitals, schools, and police service; for the maintenance and construction of roads and irrigating facilities, the administration of wards' estates, and the like. The revenue reported from this source in 1894 was 3,514,571 Rx. ($17,572,855).

Seventh. Until within a very recent period (1894) the customs system of India—taxes on imports and exports—was one of the simplest in the world. No other country than the United Kingdom imposed duties on so few descriptions of merchandise—mainly on alcoholic liquors, salt, mineral oils, arms, ammunition, and a few special articles of food and drink. Export duties were also levied on rice and some other forms of grain. The aggregate receipts from customs fees, wharf rents, etc., in 1894, were 1,682,373 Rx. (.$8,411,865). In March, 1894—the commencement of the Indian fiscal year—the Council of India, acting under the constraint of financial exigencies, imposed duties on almost all kinds of imports, cotton yarns and piece goods—constituting about one third in value of the entire imports by sea—excepted. Subsequently a uniform duty, equivalent to three and a half per cent ad valorem, was imposed on all imported cotton goods, and a corresponding excise tax on all the competing products of Indian mills—yarns and other cotton fabrics, the product of Indian hand labor, being exempted. "Except the weaving of fancy and highly elaborated clothing, which is largely conducted in and around Benares and in a few other districts, the handloom manufacture of cotton in India is mainly a spare-time industry, and is not professional."

Other important sources of internal revenue in India are the receipts from the sale of the products of the forests owned or managed by the Government—in the form of timber, firewood and charcoal, bamboos, sandalwood, grass, and other products—the total of which for 1894 was 1,723,022 Rx. ($8,615,110).

An annual tribute or contribution from a large number of native and mainly petty states of India toward the support of the Imperial Government was reported for 1894 at 774,337 Rx. ($3,871,685). On the other hand, the Imperial Government grants annual allowances, or pensions, to the native hereditary rulers of such states or their families, the aggregate of which for the fiscal year 1894 was 508,443 Rx. ($2,542,215).[7]

Income Tax.—The experience of the (British) Indian Government in attempting to raise revenue from the taxation of incomes, or by an income tax, is exceedingly interesting, and ought to be most instructive to the people of other countries. As a rule, the annual revenues of the Government of India do not and for a lengthened period have not equaled its annual expenditures, and the increase in the public debt of the country in recent years has accordingly been very considerable.[8] The major part of this debt, however, has been incurred for the construction of ordinary roads and railways, which in turn have not been unremunerative, and have made possible a large export sale of wheat and other commodities, which before their construction was impossible. The debt, or expenditures resulting in debt, has therefore contributed greatly to the welfare of the people of India. At the same time the demand and necessity for constantly increasing expenditures, continually confronts the Government with the most difficult problem of how to increase its revenue—a problem that very recently has been threatened with increasing embarrassment, owing to the position of not a few people in England, who, with more of sentiment than discretion or knowledge, have opposed the continuance of the present governmental monopoly of the production and sale of opium. A large increase of taxation in any form is regarded as not feasible in India; not so much because of an unwillingness on the part of the people to pay, for they are accustomed to pay all dues which they regard as fairly claimable by the sovereign power, and more especially when the demand is accompanied with control of force; but by reason of the extreme poverty and consequent actual inability of the masses of the people to pay. Experience has, moreover, shown that the natives of India are particularly opposed to all forms of direct taxation, other than on land, and more especially to taxes on houses, vehicles, and trades; and so extreme are their prejudices in this respect that any new levies of such character are only imposed by the Government with the greatest caution.

Something in the way of an income tax, exempting all incomes derived from agriculture, was probably imposed by some of the old-time native rulers of India. But the first attempt on the part of the British Legislative Council of India to revive such a form of direct taxation was made in 1860. What followed is thus forcibly set forth in a speech by Mr. Hope, before the Council, in January, 1886:

"Instead of a native model for direct taxation, softened and adapted to our circumstances, we unfortunately set up that of the income tax as it was in force in England. To get direct taxation into good working order, even after a suitable model, would have been a work of time and care, in the absence of any record of the names and resources of householders. But what, except failure, could attend a sudden call on relatively ignorant and unlettered millions, at short notice, to assess themselves, or prove right of exemption, to send in elaborate returns and calculations, and to understand and watch their own interests under the system of notices, surcharges, claims, abatements, installments, penalties, and what not, consequent thereon? Necessarily there followed a long train of evils. An army of tax assessors and collectors temporarily engaged could not be pure. They were aided by an army of informers, actuated by direct gain or private animosity. Frauds in assessment and collection went hand in hand with extortion in return for real or supposed exemption. Inquisition into private affairs, fabrication of false accounts where true ones did not exist or were inconvenient, acceptance of false returns, rejection of honest ones, unequal treatment of the similarly circumstanced—all these more or less prevailed. The tax reached numbers not really liable, for zemindars illegally recovered it from tenants and masters from servants, while underlings enriched themselves by the threat of a summons.

"Subsequent acts in 1862, while affording relief in some respects, practically stereotyped many inequalities and heartburnings. In later years, the system of assessment by broad classes was an improvement on the earlier complications, but the advance of local officers toward equitable assessment was perpetually being canceled by the alterations in rate and liability, which I next notice.

"Renewed direct taxation in British India thus made a false start, from which it has never recovered. Possibly, with time and care, a great improvement might have been effected, if the law had remained unaltered. But, unluckily, with its too English form came the idea that the tax was to be, as in England, a convenient means of rectifying budget inequalities, and a great reserve in every financial or national emergency. In consequence of this idea, incomes between Rs. 200 and Rs. 500, which had been taxed at two per cent in 1860 were exempted in 1862, the four-percent rate was reduced to three per cent in 1863, and the whole tax was dropped in 1865. In 1867 it reappeared in the modified form of a license tax, at the rate of only two per cent at most, but reaching down again to incomes of Rs. 200. In 1868 it became a certificate tax at rates a fifth lower, and again commencing with a Rs. 500 limit. In 1869 it became once more a full-blown income tax at one per cent on all incomes and profits of Rs. 500 and upward. In the middle of the same year it was suddenly nearly doubled. In 1870 a further rise to fully three and an eighth per cent occurred; but with better times the rate fell in 1871 to one and one-twenty-fourth per cent, with a limit of Rs. 750, and in 1872 the limit was further relaxed to Rs. 1,000 and upward. In 1873 came a second period of total abolition, to be succeeded from 1877 to 1878 by the new series of acts. Along with the changes in rate and incidence just described came changes in name, form, classification, and procedure. With one object or another, twentythree acts on the subject have been passed since 1860."

An income tax at a low rate, at present existing in India, grants an exemption of 500 rupees on all incomes, and exempts from taxation all income from the ownership of land or the sale of the products of land, and from property solely employed for religious or charitable purposes. It is thus assessable mainly on salaries, pensions, the income of companies, and of the ordinary trades and professions. Its existence is the cause of considerable friction with the officials who administer it, and constant appeals from their decisions are made from all parts of the country. In fact, this tax, at its present low rate, is universally detested, and the receipts from it are comparatively so inconsiderable—only 1,717,627 Rx. ($8,588,135) in 1894-that it may be regarded as a fiscal failure. Its whole experience in India furthermore reaffirms what is worthy of being regarded as an economic principle, namely, that when an income tax ceases to be regarded as generally oppressive it ceases also to be remunerative to the state.

One other point in this connection is especially worthy of notice. For a long period of years India has been characterized as a "sink-hole" of the precious metals, or, in other words, there has been for many years a continuous flow of the precious metals—gold and silver—into India, where they have to a large extent disappeared, undoubtedly by burial under ground for the purpose of hoarding and concealment. The motive for this under the Mogul and native rulers was unquestionably to escape direct plunder or confiscation; but under British rule these hoards, amounting unquestionably to many hundreds of millions, are not taxed, mainly by reason of their inaccessibility, and partly by the recognized policy of the Government to avoid direct taxation of active capital, and encourage, by making safe its employment, the tendency of these buried treasures to come to light and enter into the channels of trade. And that this policy has been a wise one is shown by the fact that within recent years there has been an increasing disposition on the part of the Indian owners of concealed treasures—especially the Indian princes or rajahs—to withdraw them from their hoarding places and invest them in Government bonds, or other desirable, interest-bearing securities; and in this way a very great addition to the world's active stock. the money metals, may be anticipated in the perhaps not-distant future.

In the year 1893 the burden of taxation on the people of India, inclusive of the revenue derived from the rent of land, was officially estimated at two rupees and four annas, or nominally less than fifty cents per head; or, exclusive of the revenue from land, at about twenty-three cents per head—a rate relatively much lower than the taxation of England; so that, if the taxable ability of the people of India is low, the poorer classes of that country, it is claimed, are more lightly taxed than the poorer classes of Europe, or even of the United States. Before England assumed dominion in India the system of exaction of her native rulers was so perfected that they were assured of the very last penny that could be taken from the ryots, or peasantry, without stripping them of everything; leaving to the tenant class little more than the privilege of living. To-day the existing system of taxation in India is con-j ceded to be at least eminently just. To-day it is generally admitted that there is no government in the world whose administration is more honestly conducted, and which is now doing more for the material good of the governed, than the present British Government of India. And herein is to be found the secret of England's success in ruling the vast congeries of people of different) races, languages, and religions, known to us as India.

The consideration of another matter of recent occurrence and of the highest economic and social interest and importance, appropriately finds place in any discussion of the tax system of British India; more especially because it sets forth an attempt, founded on an unwarranted sentiment, indirectly to impose a large additional burden of taxation on the people of that country. As already pointed out, a present annual receipt of some $33,000,000 of revenue from the monopoly of the production and sale of opium, the incidence of which does not fall upon the Indian people, constitutes an important factor in this system. Acting on the assumption that the continued use of this drug, as a narcotic and stimulant, is in the highest degree injurious to the consumer—worse even than the continued use of alcohol—and especially demoralizing and destructive to the people of China, who are the purchasers and consumers of the major part of the opium product of India, a body of public opinion has in recent years grown up in Great Britain whose representatives hold that it was disgraceful and positively wicked for a people professing to be moral and enlightened to engage in or sanction the business of producing and supplying opium; and that it is the duty of their Government to at once interfere and put an end to it. And in recognition of this public opinion, and in deference to a numerously signed address to the Crown, the British Government, in September, 1893, created a commission, consisting of nine eminently qualified persons, including two natives of India of high position and unconnected with the Government, and an eminent physician, to inquire into and fully report on this whole subject The first report of the commission, published in 1894 and presenting simply the evidence taken in England, was an exhibit of the most interesting but utterly antagonistic and contradictory opinions and evidence. For the petitioners, sixteen witnesses, mainly missionaries, medical men connected with missions and residents for considerable periods in India and China, were called; and nearly all of these, as the result of personal experience and observation, testified in the most positive manner, and in consonance with popular opinion, that the use of opium physically, morally, and socially is highly deleterious, and ought to be discouraged, and if possible absolutely prevented. Considered by itself this testimony would seem to be conclusive and incapable of refutation. But, on the other hand, an equal number of witnesses—English officials, qualified by education, lengthened residence in India and China, and exceptional opportunities for observation, civil servants, medical men of the highest reputation connected with hospital and sanitary work and with the army in every part of India—gave unqualifiedly contradictory evidence, which may be summed up as follows: That opium has been used for centuries in India and China, without any extensive deleterious influence on the population; that the "Sikhs" of India, who in point of physical structure and health are claimed to be the finest people in the world, and whose religion forbids the use of tobacco, are habitual users of it; that while the excessive use of opium is unquestionably in a high degree deleterious, it is far less so than the excessive use of alcohol; that the use of opium in India and China is comparatively much less than the use of ardent spirits in Great Britain; that the excessive use of it, as by the so-called "opium sot," is the result very largely of the circumstance that the miserably poor afflicted with disease in India, China, and other Asiatic countries where there is no intelligent medical treatment, and little or no hospital service, resort to it as the only means of lessening their sufferings; that so far from the allegation being true that the supply of opium by India to China is disastrous in the highest degree to the people of the latter country, the fact is that the use of the Indian product, owing to its higher quality and price, is almost wholly restricted to the wealthier classes of China; that the cultivation of the poppy for the production of opium is very general in China, and to such an extent that one single province of the empire annually produces more opium than the entire export of India; and, finally, that any attempt on the part of either the Indian or Chinese Government to interfere with the production and sale of opium, with a view of restricting or preventing its consumption, would be utterly futile, and in the case of the former country would undoubtedly lead to revolution.

One witness, Surgeon-General Sir William Moore, stated as the result of thirty-three years' service and observation in India, that opium-smoking is practically harmless, and opium water not only harmless, but beneficial in moderation, and a prophylactic against malarial fever.

The following circumstance was also regarded as substantiating this position: During the years 1893-'94 the island of Hong-Kong, on the Chinese coast, was ravaged by a pestilence, in the nature of a filth disease, of great malignity. Since its abatement it is claimed, with an accompanying array of evidence, that the opium smokers and eaters were almost without exception exempted from the pest.

Very naturally, also, the (British) Indian civil-service officials, holding the view that the large revenue derived by the Government from the monopoly of the production and sale of opium is in no sense a tax burden upon the Indian people; and recognizing also the great difficulty (but absolute necessity) of making good the deficiency consequent upon the abrogation of such revenue through new and additional taxation upon the people, were unanimously of the opinion that any change in the existing system in respect to opium would be in the highest degree inexpedient and unwarranted. When the question was put to Sir John Strachey, who in the course of thirty-eight years of Indian civil service has filled almost every post, from the most subordinate to the governorship of provinces and membership of the Government of India, how he accounted for the great contrariety of belief in respect to the opium question, he made answer as follows:

"The ignorance that prevails in this country [England] regarding everything Indian is enormous, and is not confined to those whom we expect to be ignorant, but extends to the most highly educated classes. It extends to all Indian subjects—history, geography, the conditions and habits of the people, the constitution of the Government—in fact, everything. I will give an illustration which always seems to me to have a useful bearing on this opium question. Mr. Buckle, in his History of Civilization, derives all the distinctive institutions of India and the peculiarities of its people from the fact, that the exclusive food of the natives of India is rice. It follows from this, he tells us, that caste prevails, that oppression is rife, that rents are high, and that customs and laws are stereotyped. I have no doubt that if Mr. Buckle had been asked, he would have said that the same cause accounted for the consumption of opium in India. I sometimes ask my English friends, when they talk about opium, what they suppose to be the ordinary food of the people of India. The almost universal answer, perhaps with an air of displeasure that they should be asked such a foolish question, is that of course it is rice. I believe that nine tenths of the educated men and women of this country believe this to be true. V/hen they have not learned such an elementary fact as this, that throughout the greater part of India rice is no more the ordinary food of the people than it is in England, how can we be surprised if they do not know the truth about opium? We who have spent our lives in India are not all fools or impostors. When I hear the Government of India charged with the abominable wickedness of poisoning its own subjects, and millions of Chinese also, for the sake of filthy lucre, there is only one reason that prevents me from being filled with indignation, and that is that I know that these charges are the offspring of ignorance alone. Unfortunately, this does not make them less serious, for, of all enemies to human progress, ignorance is the most formidable, and is especially formidable when, as in this present case, it is combined with honest enthusiasm and an anxious desire for what is right."

The commission, having finished its investigations in England, visited India, and there renewed them in nearly every place of importance for obtaining information. It examined seven hundred and twenty-three witnesses, of whom four hundred and sixty-six were natives of India or China, including government officials, planters, landowners, traders, members of the professional classes, especially physicians, missionaries of nearly every denomination, military officers and private soldiers, and the chiefs and officials of the native states.

As a result of this elaborate inquiry, the commission, by a majority of eight to one, pronounced clearly and unhesitatingly in favor of the maintenance of the existing system of opium production and sale of opium in India; finding no evidence of extensive moral or physical demoralization arising in India from the use of the drug, or of any desire on the part of its people or of the Chinese Government to prohibit it.

The commission also decided, in respect to the effect on the finances of India of a prohibition of the sale and export of opium, that, "taking into consideration the compensation payable, cost of the necessary preventive measures, and the loss of revenue that would result from a policy of prohibition, the finances of India are not in a condition to bear the losses that such a policy would entail."

The testimony of the missionaries in India before the commission was not unanimous. That of the members of the American Methodist Episcopal and Canadian Presbyterian commissions. and the representatives of the Presbyterian and Baptist missions, was in favor of prohibition. On the other hand, the views of the Episcopal bishops and clergy of Calcutta and Lucknow, and of the Roman Catholic Archbishop of Calcutta, were adverse to prohibition. Several of the former, however, frankly admitted that the evils of the opium habit, deplorable as they undoubtedly are, have been grossly exaggerated, and the good that it accomplishes has been but little recognized.

The use of opium in India and China is as much a natural habit as the use of alcohol among Western nations. It has been practiced in those countries for centuries, and it would seem impossible by legislation, and especially by the legislation of an alien nation, to do anything more than control the more manifest evils resulting from it. A policy of rigid restriction of the use of opium would unquestionably be a substitution of the use of opium by alcohol; and all the evidence given before the commission as to the evils arising from the opium habit showed, that as a source of social disorder, organic disease, insanity, and suicide, opium is not to be compared with alcohol.

Note.—For the full details of this most interesting inquiry, whether regarded from an economic, social, or medical point of view, reference is made to the First Report of the Royal Commission on Opium, with minutes of evidence and appendices, presented to Parliament in 1894, and to two final reports, Parts I and II, with historical appendices, etc., presented to Parliament in 1895, after the return of the commission from its visit to India.

  1. In the Statistical Abstract relating to British India, annually published by the home Government, eighty-eight different languages, distinctively Asiatic or non-European, are recognized as characteristic of the population. In 1884-'85 out of a then total population of 253,891,536, only 202,920 were reported as using English in the sense of a mother-tongue; and only 1,862,626 that admitted of classification as "Christians."
  2. Resources of modern Commerce. A. J. Wilson. Longmans, London, 1878, vol. i, p. 57. Taxation in India. Shoshee Chunder Dutt, Justice of the Peace, Calcutta.
  3. Under the old-time system of native rulers, frequent wars, consequent on foreign invasions and internal race antagonisms, with accompanying famines and epidemic diseases, materially restricted the growth of the population of India. But under the conditions of peace that have been attendant during the last half century of British rule, the population of India has increased so rapidly that the limits of the agricultural capacity of the country, and the consequent means of subsistence for its people, seem to be approaching exhaustion; and one extraordinary drain upon the revenues of the Government in later years has been due to the wise creation of a national famine fund, to be U5ed in cases of periodical emergencies due to failure of the crops, for the relief of multitudes who would otherwise perish by starvation.
  4. The value of the silver rupee—Rs.—in India at the time mentioned by Sir Richard Temple, expressed in terms of the United States gold dollar, was about $0.48 cents. Its present (1896) corresponding gold value is about $0.23.4 cents.
  5. "The gross revenue and the gross expenditure of India are very different things from the real revenue and real expenditure. In the gross revenue is included the entire receipts, and in the gross expenditure is included the entire expenditure of the whole railway system of India, the whole of the canal system, and of the irrigation works."—Speech of Mr. H. Fowler, Secretary of State for India, introducing into Parliament thc Budget for India, August 15, 1894.
  6. Wilson's Resources of Modern Commerce. London, Longmans, 1878.
  7. The British Government has respected the possessions of the native chiefs of India, and about one third of the country still nominally remains in the hands of its hereditary rulers. These, in return for their maintenance and protection by the Imperial Government of India, contribute annually from their resources a comparatively small sum for its support. The independent gross annual revenue of these so-called "feudatory" states is reported to amount to about £6,000,000 ($30,000,000), and their permanent military forces at "something like 300,000."
  8. For the year which closed on March 31, 1896, there was an estimated surplus of about 9,500,000 rupees.