Compromise and adaptation in colonial taxation

Abstract

This chapter investigates the colonial tax system in Indonesia under Dutch rule. It demonstrates how in contemporary colonial logic, taxation, socio-economic development, and equality were seen as intrinsically connected. Taxation, and integrated systems of coerced labour, were presented as important pillars in colonial ‘civilisational’ projects of state formation, governance, and bureaucratisation. Far from simple extractive instruments deployed to fund empire, taxes were seen as integral administrative and disciplinary instruments to enhance economic centralisation, equality, capitalisation, monetisation, and the political transformation and reorganisation of colonised societies. The monetary tax system was designed to curtail the exploitative character of previous systems of labour exploitation and distribute the tax burden more equally among colonised populations across the archipelago. However, the limited capacity and considerable dependence of the Dutch administration on local rulers obstructed the supposed transformative power of taxation. Tensions between colonial policy and practice were resolved on the spot through negotiation, rendering a weak institutional infrastructure and preventing the emergence of a transparent and just bureaucracy, which ultimately only enhanced political and fiscal inequality.