The Demise of the Revenue Farm System in the Federated Malay States

Abstract

Within the space of a few years a remarkable transformation took place in the taxation system of the Federated Malay States (FMS). Up until the early 1900s the British administration of these states relied, as had the sultans and chiefs from whom the British had taken control in the 1870s, on the revenue farm system for collecting many taxes. Most revenue farms were constituted according to the standard pattern found elsewhere in Southeast Asia at this time and in Europe up to the eighteenth century. The government granted a private contractor, the revenue farmer, the exclusive right to collect a certain tax in a specified area for a set number of years in return for a fixed rent, and the farmer kept for himself any money which he collected over and above what he owed the government in rent. A great variety of taxes were collected in this way. There were farms to collect the export duty on atap, firewood, timber, and rattan; most towns had market farms; and in Perak there was even a ‘farm of river turtle eggs’. But the most important farms were those which profited from what officials referred to as the ‘luxuries and vices’ of the immigrant Chinese community, particularly the workers who mined the tin which was the main source of wealth of these states.These farms were for the collection of the import duty on opium to be consume by Chinese in the mining districts of the interior, the sale of prepared opium (chandu) in coastal districts, the manufacture of spirits and the collection of the import duty on spirits, the right to run pawnshops, and the right to organize public gambling. Next to the export duty on tin, which the government collected itself, the income from these farms was the government's largest source of revenue. In the period 1890-94, 38.8 percent of the total revenue of the four states came from the export duty on tin and about 33 percent from the farms.2 But within the space of a few years the government abolished all the major farms, and by 1913 virtually none of the revenue of the FMS cam from revenue farms.