This incentive scheme has some parallels to ‘tax farming’: Businessmen (either individual or
syndicates) who wish to become state fiscal agents submit competitive bids to the government
(council) specifying how much they are willing to pay for the privilege of collecting taxes. In
principle, the highest bidder is to win the council’s choice. Proponents of the system today argue
that it minimizes administrative costs and results in more efficient collection (Azabou and Nugent,
1989). Opponents argue that the supposed gains are largely illusion because the system leads to
extortion through overzealous collection. Thus, the government would have to spend considerable
resources on monitoring tax collectors (Stella, 1993). Historical evidence indicates that tax
farming has often led to extortion, initiating tax riots (Webber and Wildavsky, 1986).
This incentive scheme has some parallels to ‘tax farming’: Businessmen (either individual orsyndicates) who wish to become state fiscal agents submit competitive bids to the government(council) specifying how much they are willing to pay for the privilege of collecting taxes. Inprinciple, the highest bidder is to win the council’s choice. Proponents of the system today arguethat it minimizes administrative costs and results in more efficient collection (Azabou and Nugent,1989). Opponents argue that the supposed gains are largely illusion because the system leads toextortion through overzealous collection. Thus, the government would have to spend considerableresources on monitoring tax collectors (Stella, 1993). Historical evidence indicates that taxfarming has often led to extortion, initiating tax riots (Webber and Wildavsky, 1986).
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