Tax farming

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Tax farming is the privatization of tax collection; the principle of giving the responsibility of tax collection to citizens or groups, rather than the government. Historical examples include the tax collection methods of Seljuks, Mamluks, and France prior to Louis XVI. A modern example of a variation of tax farming is the United States IRS outsourcing of the collection of taxpayers' debts to private debt collection agencies.

1 History
2 Use, benefit, liability
3 Modern variations
4 See also
5 References

[edit] History

Historically, tax farming often occurred when a centralized state extended the authority to collect taxes to another individual or group. In many cases, such as the Abbasid practice of Iqta, these rights were granted by an authority, in this example the caliph, for services rendered or promised. In the Byzantine pronoia system, similar rights were often purchased from the crown.<ref>Timothy E. Gregory, A History of Byzantium (Malden, MA: Blackwell, 2005)</ref> Though such arrangements in some respects seem similar to the feudal system, there are significant disparities, including continuance of state power and, at least in the case of pronoia, theoretical time limits on the grant. In many cases, including those mentioned, tax rights were not transferable or divisible, unlike feudal fiefdoms.

[edit] Use, benefit, liability

Privatization is often effective for tax revenue collection. In many parts of the world, including Europe, the Middle East and the Far East, tax farming was responsible for state consolidation and an increase in central autocracy. However, tax-farmers often abuse the taxpayers for tax collection, causing discontent and a general decline in use of tax farming.

[edit] Modern variations

In September 2006, the IRS began to outsource the collection of taxpayers debts to private debt collection agencies. Opponents to this change note that the IRS will be handing over personal information to these debt collection agencies, who are being paid between twenty-two and twenty-four percent of the amount collected. Opponents are also worried about the agencies being paid on percent collected because it will encourage the collectors to use pressure tactics to collect the maximum amount. IRS spokesman Terry Lemons responds to these claims saying the new system "is a sound, balanced program that respects taxpayers' rights and taxpayer privacy." Currently there are other state and local agencies that are using private collection agencies and have not had any problems.<ref> IRS Moves Ahead on Debt-Collection Plan</ref><ref> IRS Presses Ahead With Privatization of Tax Debt Collections - 09/14/06</ref>