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The Burden of Taxation in Colonial Indonesia in the Twentieth Century

Published online by Cambridge University Press:  07 April 2011

Anne Booth
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Extract

Through much of the last four decades of Dutch rule in Indonesia (1900-1941) the question of “native welfare” increasingly concerned colonial administrators and scholars. In her speech in 1901, Queen Wilhemina drew attention to the declining state of native welfare in Java, thus ushering in the so-called period of ethical policies. One aspect of the problem of declining welfare among the indigenous population both in Java and elsewhere which became the subject of government investigation was the burden of taxation. Writing in 1901, P. Brooshooft drew attention to the fact that “the present [colonial] budgets are always closed with a deficit…and the most pressing needs cannotbe filled; the capacity of the people to pay is exhausted more and more through heavier taxation”. Twenty years later, W. Huender, in surveying the economic conditions of the indigenous people of Java and Madura, felt

it is disquieting that taxation is not increasing more…it is impossible to maintain that the indigenous population is not taxed heavily enough. Taking account of the low capacity of people to pay the contrary is rather the case; and present plans to have the people pay even more (for example, by increasingthe head tax and the landrent) can only make one shudder. In fact the most difficult and pressing problem in Java and Madoera is that, while the people have been taxed to the utmost limit and are “minimum sufferers”, apparently the various government measures taken to improve the situation have not been effective.

Type
Articles
Information
Journal of Southeast Asian Studies , Volume 11 , Issue 1 , March 1980 , pp. 91 - 109
Copyright
Copyright © The National University of Singapore 1980

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References

1 An extended discussion of the ethical policy can be found in Furnivall, J.S.,Netherlands India: A Study of Plural Economy (Amsterdam, 1976)Google Scholar; Wertheim, W.F., Indonesian Society in Transition(Bandung, 1956); andGoogle ScholarWertheim, W.F. and Giap, The Siauw, “Social Change in Java 1900-30”, Pacific Affairs 35 (1962): 223–47CrossRefGoogle Scholar.

2 Brooshooft, P., “The Ethical Direction in Colonial Policy, 1901”, Indonesia: Selected Documents onColonialism and Nationalism. 1830-1942, ed. and trans. Penders, C.L.M. (St Lucia, 1977), p. 76Google Scholar.

3 Huender, W., “Survey of the Economic Conditions of the Indigenous People of Java and Madura, 1921”, in Penders, C.L.M. (ed. and trans.) op. cit., p. 96Google Scholar.

4 Ranneft, J.W. Meijer and Huender, W., Onderzoek Naar Den Belastingdruk Op De Inlandsche Bevolking [An Inquiry Concerning the Tax Burden on the Native Population] (Weltevreden, 1926)Google Scholar; Ginkel, F. de M. van, Verslag van de Economische Toestand en de Belastingdruk met betrekking tot de Inlandse Bevolking van de Gewesten Oostkust van Sumatra en de Lampongse Districten [Report on the Economic Situation and the Tax Burden with Reference to the Native Population of the Regions Eastcoast of Sumatra and Lampong Districts], (Weltevreden, 1929); andGoogle ScholarGotzen, L. “Volksinkomen en Belasting” [National Income and Taxes] Koloniale Studien 17 (1933): 449–84Google Scholar.

5 Polak, J.J., The National Income of theNetherlands Indies, 1921-39 (New York, 1942)Google Scholar. Polak's study is, in terms of modern national income accounting concepts, an attempt to calculate domestic income at factor cost. He does this by estimating separately the following components of domestic income: (i) personal income accruing to Indonesians, (ii) personal income accruing to Europeans, (iii) personal income accruing to foreign Asiatics (Chinese, Arabs), (iv) government export income, (v) income accruing to non-residents.

6 Paauw, Douglas, Financing Economic Development: The Indonesian Case (New York, 1960)Google Scholar, Ch. 5 and App. , C. Neumark'snational income estimates were published inEkonomi dan Keuangan Indonesia 7, no. 6, (1954)Google Scholar.

7 A useful summary of contemporary thinking on the subject of tax incidence can be found in Pechman, Joseph A. and Okner, Benjamin A., Who Bearsthe Tax Burden? (Wáshington, 1974)Google Scholar. A survey of the literature relating to developing countries can be found in Wulf, Luc de, “Fiscal Incidence Studies in Developing Countries: Survey and Critique”, IMF Staff Papers 22, no. 1 (1975): 61-131Google Scholar.

8 It is really only possible to talk about “colonial” public finances for the period after 1900, as before that the Netherlandsand Netherlands Indies budgetary procedures were not formally separate. For a discussion of the process of financial separation, see Creútzberg, P. (ed.), Het Ekonomisch Beleid in Nederlandsch-Indië [Economic Policy in the Netherlands Indies], vol. I (Groningen, 1972), pp. xxi–xxix.‘Google Scholar

9 See Pechman, and Okner, , op. cit., pp. 18–20Google Scholar. The inclusion of the indirect taxes in the income base follows from the differential incidence assumption. If one is comparing all existing tax structures with a proportional income tax yielding the same revenue, then a consistent base mustbe used, which means including indirect taxes in the income base.

10 Polak assumes that the company dividends and profits accruing to Netherlands East Indies residents would be taken into account in the income tax data. However, the company income tax has the effect of reducing this income source below what it would otherwise be, and allowance should be made for this. Also some attempt should be made for adjusting the income base for retained earnings. For a useful discussion of these issues in the context of contemporary Malaysia see Salleh, Ismail Muhammad, Tax Incidence and Income Redistribution in West Malaysia (Ph.D. diss., University of Illinois, 1977), Ch. 10Google Scholar.

11 Sajogyo, , Usaha Perbaikan Gizi: Applied Nutrition Programme Evaluation Study (Bogor, 1975), p. 24Google Scholar. In using 240 kg of rice for all sections of the population we are assuming a common level of “subsistence” applies to all. This is true only if subsistence is interpreted as being basic food (calorie) requirements. When housing and other non-food items are taken into account, allowance must be made for the fact that these would have been less expensive in rural areas where almost all the indigenous population lived. In this context, it is worth noting that according to Polak's calculations the indigenous cost of living index fell more rapidly duringthe depression period than the European one. (Polak, op. cit. p. 51a). This should be borne in mind in interpreting the results in Table 6; to some extent the relative lightening of the tax burden on the non-indigenous population after 1934 was offset by their higher cost-of-living.

12 It should be noted that “subsistence” is valued using Java rice prices. This is necessitated by the complete absence of dataon food production and prices outside Java. Polak was forced into a similar expedient; see Polak, op. cit., pp. 8-9.

13 See Gandhi, Ved P., Tax Burden onIndian Agriculture (Cambridge, 1966), Ch. 2Google Scholar.

14 This follows the assumption made by Polak (op. cit., pp. 40-43).

15 Götzen (op. cit., p. 469) includes revenues from salt and pawnshop monopolies in his calculations of the native tax-burden. They did not amount to more than 20% of the total for the period 1926-32.He does not appear to discuss the burden of revenues from utilities.

16 Scott, James C., The Moral Economy of the Peasant (New Haven, 1976), esp. ch. 4Google Scholar.

17 See, in particular, Furnivall, , op. cit., esp. pp. 38 and 57Google Scholar; Day, Clive, The Dutch in Java (Kuala Lumpur, 1966), pp. 172–73, andGoogle ScholarSelosoemardjan, , Social Changes in Jogjakarta (Ithaca, N.Y., 1962), pp. 23–40Google Scholar.

18 A detailed discussion of the Raffles interregnum in Javaand his attempts to reform the land-revenue system can be found in Bastin, John, Raffles's Ideas on the Land Rent System in Java (The Hague, 1954)Google Scholar.

19 For a discussion of the assessment procedures basedon personal observation, see Furnivall, J.,Studies in the Social and Economic Development of the Netherlands East Indies (III d) The Land Revenue System (Rangoon, 1934), esp. pp. 7–16Google Scholar.

20 E.g., in the directly governed territories of the Outer Islands, 267,317 liable workers paid 1,393,968 guilders in ransom. As each worker was required to work 17.6 days this amounts to 29.6 cents per worker per ransomed day. In the native states the figure was rather lower.

21 Paauw, , op. cit., p. 401Google Scholar. In 1936, the revenues from the special export duty on native rubber exceeded 49 million guilders compared to only 7.6 million from the ordinary export tax. In the later years of the decade, revenues declined in total, although the proportion from native smallholders probably stayed roughly constant. An interesting discussion of the effect of the special export tax on smallholders in Central Sumatra is given in O'Malley, William J., The Bengkalis Hunger Riots of1935 (Canberra, 1979)Google Scholar, forthcoming in a volume of essays in honour of Götzen, P. Creutzberg. (op. cit., p. 473)Google Scholar found that for the period 1926-32, taxes accounted for a higher proportion of “native incomes” outside Java than in Java, although he was of course using a different income concept from the one used here.

22 Kolff, G.H. Van der, “An Economic Case Study: Sugar and Welfare in Java”, Approaches to CommunityDevelopment, ed. Ruopp, P. (The Hague, Bandung, 1953), p. 194Google Scholar. See also the same author's “European Influence on Native Agriculture”, The Effects of Western Influence on Native Civilisations in the Malay Archipelago, ed. Schrieke, B. (Batavia, 1929), pp. 103–25Google Scholar. Further discussion of the role of the sugar industry in colonial Java can be found in Geertz, Clifford, Agricultural Involution (Berkeley, 1963), esp. Chs. 4-5Google Scholar.

23 Selosoemardjan, , op. cit., pp. 280–81Google Scholar.

24 Ibid., pp. 279-80.

25 Geertz, (op. cit., p. 88)Google Scholar gives details of a “typical cropping cycle” for sawah land leased tosugar companies in Java after 1900.

26 Geertz claims that by 1930 sugar concerns were employingmore than 800,000 Javanese. Some data on payments made to Indonesians by the sugar industry in Java in the period 1920-38 can be found in Pelzer, Karl J., Pioneer Settlement in the Asiatic Tropics (New York, 1945), p.256Google Scholar. Wage and other payments dropped sharply after 1931. Pelzer also gives details ofthe area under sugar cane during these years. See also Creutzberg, P., Changing Economy in Indonesia, vol. I: Indonesia's Export Crops, 1816-1940 (The Hague, 1975), pp. 75–76Google Scholar.

27 See Meulen, W.A. Van der, “Irrigation in the Netherlands Indies”, Bulletin of the Colonial Institute of Amsterdam 3 (1939): 142–59Google Scholar, for figures on irrigation expenditures. Details of the decline in expenditures on fixed assets, both absolutely and relative to GDP, are given in Creutzberg, P., Changing Economy in Indonesia, vol. 3:Expenditure on Fixed Assets (The Hague, 1977), esp.Table 2Google Scholar.

28 Available data suggest that the number of Javanese estate coolies on contract in the Outer Islands fell very sharply after 1931. See Statistical Pocketbook of Indonesia, 1941 (Batavia, 1949), Table 96Google Scholar.

29 See Scott, , op. cit., esp. Fig. 3, p. 119Google Scholar. More information on the tax burden imposed on Vietnamese peasants during the period can be found in Chinh, Truong and Giap, Vo Nguyen, The Peasant Question, 1929-38, Cornell University Southeast Asia Program Data Paper no. 94 (Ithaca, N.Y., 1974), pp. 43 ffGoogle Scholar.

30 O'Malley, (op. cit., pp. 2–3)Google Scholar asserts that both the repressive nature of the Dutch colonial regime and the fact that “few indeed were threatened with starvation in the 1930s in the Indies” accounted for the lack of popular unrest during the decade.