taxfarming

Taxfarming is a system in which a government delegates the collection of taxes to private individuals or firms for a defined area and period, in exchange for a fixed payment or a share of the revenue. The tax farmer effectively becomes a private administrator of public revenue, and may bear the risk that the amount collected falls short of what was contracted. Collection often includes the use of coercive powers to secure payments as defined by the contract.

In practice, the state typically auctions or assigns the right to collect a specified tax in a district to a contractor who pays an upfront sum or annual rent to the government and then collects taxes from residents. The farmer keeps any surplus above the contracted amount and is responsible for enforcing payment. The arrangement can involve additional fees or fines and may permit some discretion in assessing or collecting taxes, potentially creating scope for abuse or corruption.

Tax farming has been used in many historical contexts, especially in early modern and pre-modern states. In France, the ferme generale collected indirect taxes during theAncien Régime, while in the Ottoman Empire, mültezims collected various taxes and duties. The practice was valued for providing immediate revenue to rulers and reducing the need for centralized payrolls, but it often generated incentives for harsh collection and revenue distortion.

The system declined as centralized bureaucracies expanded, professionalized tax administration, and adopted standardized assessments and salaried officials. In modern contexts, privatized or outsourced tax collection exists only for specific functions in some jurisdictions, typically under strict oversight to mitigate abuses. Taxfarming is generally discussed as a historical or theoretical model of tax administration.