The Long Term Problems of the France's Tax Farming System

Like most European countries in the Early Modern Period, the French monarchy faced almost constant economic difficulties. As its expenditures continued to grow, the crown had to borrow money and seek new revenue streams just to keep from going bankrupt. To help combat short term economic problems, the French government devised a scheme whereby it would sell the right to collect taxes to private investors. This raised quick cash for the monarchy, but only compounded France's economic problems in the long term.

Tax farming was not a new idea. It was used to some extent in China, the Roman Empire, the Ottoman Empire, Ancient Greece, and Ancient Egypt. It was probably France's Ancient Regime who used it most extensively, however. Because of this, pre-Revolutionarly France serves of a good illustration of the long term economic problems which come from a heavy reliance of tax farming. With every "tax farm" sold, the French government increased the tax burden on its citizens and reduced the amount of revenue it could expect to bring in. Over time, these and other poor decisions helped contribute to popular support of the French Revolution.

A "tax farm" is simply the right to tax a certain area for a specified amount of time. Thus, it is an early form of outsourcing. Instead of paying its own officials to collect taxes, governments can sell tax farms to individuals who are then obliged to collect a certain amount of taxes every year for the government. This not only provides the government with quick cash when the tax farm is sold, but it guarantees that the government will receive a certain amount of revenue every year. If a recession hits and the tax farmer is not able to collect as much tax money as he had anticipated, he is liable for paying the difference to the government.