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CEYLON GRAIN TAX.

21889.

LORD KNUTSFORD to SIR A. E. HAVELOCK.

(No. 45).

SIR,

Downing Street, February 12, 1892.

PUBLIC RECORD OFFICE

Reference :-

C.O. 882

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SSION OF THE

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I AM now in a position to convey to you my decision upon the difficult question of the Paddy Tax, as to which you have addressed me in a series of despatches at once lucid, well-reasoned, and judicial in tone.

2. That decision has been, no doubt, delayed for a considerable time, but it could not properly be arrived at without a full and careful consideration of the voluminous papers, debates, and correspondence containing the arguineots, both for and against, any change in the existing system. My difficulty, moreover, in forming a judgment in this long and heated controversy has been increased by the fact that the more closely I examined the matter the more strongly did the conviction become impressed on my mind that I could no longer concur in the view which was supported by the great weight of official opinion,

3. It is needless to say that I regret that my decision should run counter to the opinion of so many persons in the Colony, whe, from their experience, are competent to form a sound judgment on the question; but I would observe that the objectionable features of the tax are in the main hardly disputed by the majority of those who oppose its abolition, and that some of them look forward to its ultimate abolition, afthough, for financial reasons, they feel now only able to recommend a reduction or modification of it.

4. In my judgment, the time has arrived for abolishing this. Paddy Tax, on the ground, inter alia, that it is fruitful of hardship and sometimes of grievous suffering to a large but unascertained number of the peasants; is unfair to them as a class; atid is indefensible in principle. To complete my stateinent, I will add that I am not prepared to admit a connexion, legal or economic, between the question of the Paddy Tax and that of the Import Duties on grain; that I do not suggest any interference with the latter under existing circumstances; and, lastly, that I do not propose a general land tax in lieu of the Paddy Tax.

5. So many pointe have been raised, and so many questions involving technicalities have been discussed during this controversy, that it would be impossible, even if it were desirable, within the limits of a despatch, to deal with them in any detail, but I consider it right to state the main grounds upon which my decision is based, otherwise I might not unjustly be held to have adopted all the views and suggestions which have been put forward by the advocates of abolition, who have not been wholly free from the faults common to controversialists who advocate what seems an almost hopeless cause, during long years, and against the weight of official authority. They have overstated their case, and, no doubt unconsciously, misjudged their opponents, for I entirely acquit the Ceylon Civil Service of callousness or rapacity in enforcing the dues of the Crown, and I believe in what they have done and what they have argued, Her Majesty's servants have been prompted by no other motive than zeal for what they conceived to be the common good.

6. In assigning the grounds of my decision, I give the first place to the view that the Paddy Tax is fruitful of hardship, and sometimes of grievous suffering to a large but unascertained number of the peasants. In the discussions which have taken place the disputants have differed very widely in their views as to the circumstances of the paddy grower, the weight of the fiscal burden which he has to bear, and the way in which he regards his lot. This difference would be startling, and, indeed, inexplicable, if it were necessary to assume that the conditions of life were alike for the great majority of individuals who constitute the paddy-growing class. One side alleges that the goiya is a thriving, contented man, prompt and willing to pay his tax, desiring nothing, except, perhaps, that the Public Works Department should give early attention to the water storage of his village. The other side affirms vehemently that he is in hopeless

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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

ALLY WITHOUT BE REPRODUCED PHOTOGRAPHIC-

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SION OF THE

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slavery to the usurer, and sunk in despair; that he, his wife, and children are ill-clad, underfed, and an easy and frequent prey to harrowing disease; that they live in constant fear of being driven out into the world as outcasts, to support themselves by begging, stealing, or casual labour in the towns. The explanation of these seeming contradictions is, I apprehend, that the disputants are talking of different sets of people inhabiting totally dissimilar districts. The upholders of the tax are drawing on their recollection of the peasants in the more favoured districts, such as Batticaloa, and those places in the wet zone of the south and west where the full benefit of the South-West monsoon is felt. The abolitionists, on the other hand, are thinking of the paddy villages scattered throughout the larger part of the island, were the soil is poor, and water scarce. But the anomaly of the Paddy Tax as it has hitherto been collected-I am not now dealing with the question of its possible amelioration-is that, for all alike, a fixed proportion of the gross crop is exacted, whether or not the land yields such a surplus after defraying the due burdens of cultivation. This proportion may be taken roughly at about a tenth. But owing to oppression, carelessness, the injudicious zeal of subordinates, or change in the circumstances of the district, the rate appears to have been often materially enhanced, with disastrous results to the population; I refer especially to the Walapane case, and to what has been shown by the reports of Mr. Fisher and Mr. Ashnore to have occurred in Uva. It is needless to dwell on these painful chapters in the agricultural history of Ceylon, and I will only remark that, for reasons which I need not set forth, I think it may be fairly assumed that the stories of Walapane and Uva do not exhaust the tale of the unmerited sufferings which the goiyas have endured.

7. Nearly 30,000 parcels of paddy land have been sold within the last few years for default in payment of the tax; and after weighing all that is said in defence or explanation of this, I feel convinced that a system under which such a state of things is possible needs a thorough reform. I may observe, in passing, that much of what has been said in explanation of the land-sales is merely an illustration, unconsciously contributed to the discussion, of what must always be a inaterial objection to an agricultural impost levied on the gross crop. namely, that it artificially restricts the margin of profitable cultivation, and thus debars the community from availing itself to the full of the resources of the soil.

8. The Ceylon Sessional Paper XVII. of 1890 is full of observations, which point to this conclusion; such as "The cultivator did not consider the land worth keeping.” "The cultivator was present on the day of the sale and stated that he could not pay such a large sum (R. 1 25 c.) for one peck." "The owner failed to pay owing to poverty." This (field) is left uncultivated, as the tax is said to be excessive."

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"

**

"It.

(the tax) fell heavy on the owner, as the land gave no proper crop to compensate him "for the tax he annually paid." The land, being unfertile, is not cultivated regularly." Punchirala, the sole owner, died five years ago. His widow rented out the field up to 1887 for the tax (Rs. 3). She was present at the registration, when the tax on this field was increased to R. 4 (while that on another of her fields was reduced by R. 1).

She could not get anyone to cultivate the field in 1888 for the increased tax (Rs. 4)."

"

9. These details may appear petty in themselves, but are not unimportant. Except where the sale of lands is brought about by the occupiers themselves as a method of defrauding co-owners or mortgagees, the lands which are sold are those as to which a doubt may exist whether they are within or without the margin of profitable culti- vation, and were the tax abolished, the margin of profitable paddy cultivation would doubtless be largely extended. The most thorough-going advocates of the tax would hardly be prepared to maintain that the cocoa-nut, the cinnamon, the cinchona, or the tea industries could have reached their present flourishing dimensions if the Government had insisted on exacting & tenth of the gross crop.

10. As a further reason for condemning the tax, I have said that it is unfair to the goiyas as a class, and indefensible in principle. This objection, I need hardly point out, is independent of any question as to the actual hardship caused by the collection of the tax in this or that district. The materials are not at hand which would justify me in committing myself to an estimate of what is the value of the annual agricultural produce of Ceylon, but it will suffice to say that the value of the paddy is but a fraction of the whole, and that paddy is not now the leading crop of the island; and yet it is the only one which is directly and substantially taxed by the State. In the early days of the British occupation this anomaly was not so striking as at present, for on other State exacted its dues in one form or another.

crops the In those days the most conspicuous instance of exemption was that of lands planted with cocoa-nuts; and the Madras

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officials, who were entrusted with the administration of the island, were not slow to perceive this fiscal injustice. But the moderate tax which they imposed upon the industry gave rise to disturbance, -as had been the case when similar attempts were made by the Dutch-and the tax was not finally insisted on, the island being withdrawn from the care of the Madras Government and placed under the Colonial Department. As the present century advanced, other crops were freed, one by one, from direct taxation, so that now the State claims a tax on wet paddy alone, out of all the annual agricultural out- put of Ceylon. It might seem only necessary to state the case in order to obtain a condemnation of the law. But it has been excused or defended on several grounds, one or two of which I may notice. First, as regards the difference of treatment shown to the coffee and tea planters, and to the goiyas, it has been said that the lands of the latter are ancestral lands, and the lands of the former were sold to them at auction by the State, and that the prices offered and accepted were based on the assumption that the lands were to be free of tax. Upon this I will only remark that the planters offered for their lands no more than they deemed them to be worth, whereas a tenth of his gross crop has been exacted from the goiya, whether his land yielded any such surplus or not; and, as to his lands being ancestral, it is highly probable that his ancestors paid their market value to the kings over and over again in the form of personal service and arbitrary exactions. Further, as to the dry grains and cocoa-nuts, the advocates of the tax argue that the paddy growers themselves always, or almost always, cultivate a proportion of these things, and that therefore it is they themselves who benefit by the exemption. If met with the fact that a great part of the cocoa-nuts are not grown in the gardens of the goiyas, but in plantations which are the property of men not of the paddy-growing class, they rejoin, either that these men eat imported rice, which is taxed, or that they are so well-to-do that the State reaches their purses through the customs duties which are levied on the luxuries they are able to purchase for themselves and their friends. But the wealthy owner of cocoa-nut trees does not, as such, pay any special tax on the imported articles which he purchases. He pays, in common with all others in the island, rich or poor, who have occasion to purchase similar articles; and, moreover, there is nothing to prevent him from living out of the island, in which case the taxation on imported articles cannot touch him at all.

11. It appears to me unnecessary to enter upon the discussion as to whether the Paddy Tax is a tax or a rent, for upon that question the advocates of the tax are not themselves agreed.

12. The impost being, in my judgment, unfair to the class, and indefensible in principle, it will be understood why I am unable to accept the recommendations made by the Select Committee of the Legislative Council as a solution of the problem. If I could regard them as practically beneficial, and as meeting the more conspicuous hardships caused to paddy growers by the existing system, there would remain the objections of principle, which are not to be disregarded in a case where practical grievances have done so much to aggravate the force of an indictment already sufficiently formidable on grounds of theory and economic science. But, in fact, I agree with the views held by you and Mr. Ashmore as to the proposals of the Committee for a system of discretionary remissions and a sliding scale of taxation.

The scheme appears

It

to me to be to a certain extent "unequal and impractical," as you describe it. would not settle the question, but would leave the tax so small in amount as not to be worth the vexation and expense of collecting it, while it might even aggravate what I apprehend is one of the gravest evils of the present system--the extent to which it places the humbler members of the paddy-growing class in the power of the headman.

13. Again, it may be asked why, If I dwell so strongly upon the anomaly of a partial tax, I am opposed to a general land tax, which, if it is only to recoup the Treasury for the loss of the Paddy Tax, would be so low in rate as to preclude the chance of inflicting hardship. My main answer is that by my decision I aim at ending an old controversy, and have no desire to start a new one.

14. The proposal of a general land tax would bring many threatened interests into the field, and thus retard a firal settlement; nor can it be forgotten that a large number of the Government officials to whom the duty must be confided of arranging for the assessment of a land tax have declared in advance that it would be most unpopular and a failure. A plan which those who are to work it dislike and condemn in advance as a failure is apt to prove a failure in fact. Moreover the fiscal history of Ceylon is not without warnings that an attempt to collect land tax on cultivations hitherto untaxed would not be free from the danger of provoking serious collisions, and whilst the apprehension of such collisions would not ordinarily be a sufficient ground for abandoning a policy determined on for paramount reasons, it is a good ground for abstaining

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