We all remember reading about local self government in India, and how it evolved over the ages. To summarise quickly, India, a land predominantly made up of rural, agrarian communities, has always had a rich tradition of local self-government .
Village councils (Panchayats) used to collect the taxes, and utilise a substantial portion of the tax revenues for the benefit of the community it self, and then pass on a pre-defined amount to the sovereign government, which then spent the money on defence, highways, welfare activities, arts and sciences etc.
We read in our History books that the Chola kings of the South improved the local self-government a lot by increasing the decentralisation and improving the controls. Even during the Mughal rule, the autonomy of the communities largely remained in tact. In urban areas, the city councils and the traders guilds coordinated and planned the utilisation of tax revenue. In short, money was collected by the grassroots level functionaries, and utilised at that level, and the centre got only what it needed, plus more during times of war.
This model enabled the village communities to have control over their finances, and to live with pride because they are not dependent on the sovereign for taking care of their basic needs.
Only during times of famine and strife did the sovereign have to dip into the treasury and provide grants or reduce the share of the government in the overall tax revenues. In spite of this, typically the royal governments had enough funds available to build tanks, canals, pilgrim houses, temples, patronise the arts, and also wage wars.
The advent of the British era signified a complete change in this model. Here was this foreign power interested solely in draining the nation's wealth and giving back just enough so that the goose can continue to lay the golden egg.
The policies and processes for tax collection were changed such that revenues would be collected and sent to the Government, which would then decide how much it needs to administer the country and how much it can send back to the Mother Land (England).
From the money it keeps for administering the country, some would be given to the provinces and district governments, and precious little would trickle down to the villages at all. If a village community is in dire need of money, it would have to petition the District Collector, to release what would effectively be a small portion of the taxes they have paid. And typically, what they get is less than what they would have asked for.
Over a period of almost 200 years, the village communities and even people in the district centres became accustomed to literally begging for government funds (their own money in fact). This process, repeated every year, slowly weakened the spirit and destroyed the pride of the local communities. They simply lost the belief in themselves - that they could decide and change their fate. A culture and a value system based on the faith that the Government holds the key for any development in their area took strong roots. Petty corruption, lack of unity among various sections of the same local community, power/fund politics as a result of fighting for the same pitiful amounts of money available - all these were the side effects of this overall tax collection and disbursal policy adopted by the colonial government.
After freedom, successive Indian governments have sought to increase the powers of the local governments, but the essential principle of money being sent to State and Central governments and then distributed downwards, remains to a large extent.
That the Indian Government needed to amend the Constitution of India, in order to increase powers to the local governments, is a stark indicator of the fact that even the founding fathers of the Constitution did not really think of restoring the power back to the Indian villagers. Rajiv Gandhi's open letter to all the Village Sarpanches of India in the mid-80's, and the Amendments introduced by the Narasimha Rao government in the early 90's, promised a lot, but delivered little.
In fact, even today, in many States, the taxes that a village can levy and utilise for it self are still not significant. Even the funds to organize panchayat elections have to come from the State Government.
Not just villages, even municipal councils and corporations are plagued by this scenario, and are bogged down by corruption, inefficiency and scandals. There are a few shining examples where bureaucrats with a vision have managed to improve the infrastructure of the towns and cities, but they have been able to do it only through Union Government or World Bank funds.
The people have better roads and sanitation in some cities now, but they feel as if they owe it to the generosity of a particular minister or a Government functionary. They have not yet regained their pride and belief in themselves. Tomorrow if the roads are damaged in floods, they would expect the Government to release funds to repair them, and would probably pressurise the local MLA or ward member. It is unlikely they know that by a change in taxation policy, their local councils would have more funds available (their own money) and need not run to the State and Union govt for Urban Regeneration funds.
Now, contrast this with the situation in Western (for lack of a better term) world. Having lived in the US for some time, and now in UK for the past one year, I have noticed that the local communities wield a lot more power here than in India. The Council Tax in UK is very high. The Borough-Council and the County administration collects other taxes as well, and has significant powers in deciding what they want to do with the money. VAT and other taxes levied on businesses, income tax etc. are apportioned primarily based on the population share. Less developed areas generally have more GGE (General Government Expenditure) per head than highly developed areas like London city, Thames valley etc. But my aim here is not to discuss the rationale for distribution of government tax revenue (that would take this blog in an entirely different direction).
My aim is to bring attention to the fact that local governments in UK, Europe and North America, enjoy far more powers of taxation and decision making leeway than their counterparts in India.
Has this always been the case? It doesn't seem so.
Till the 19th century, the Shires in UK were controlled by the landlords, in what was a very feudal system of governance. If we go back to even earlier centuries, the local communities were ruled by feudal lords, Abbots and the like. The pattern was the same in case of most European countries. In UK, it was only in 1835 that the Royal Commission on Municipal Government standardised the functioning of the local governments, drew the boundaries of all the new boroughs, and recommended that all councillors should be elected by tax payers. These reforms were extended to the Shires (Villages) in 1888.
However, from the beginning, the local communities (who for centuries wanted to be able to decide what to do with the tax money) asked for and obtained powers to levy taxes and use the money for local services. As the society became more industrial, these communities also started asserting themselves more and more.
Today, if we sometimes wonder why people in rural communities in the developed world sound so empowered and enabled, compared to our Indian villagers, the answer could possibly lie in how this system of taxation operates. I am not saying that this is the only cause. But this could be one of the critical and under researched questions.
So, on the one hand, the British imposed a strictly centralised system of taxation and expenditure policy in its colonies, while on the other hand, they slowly decentralised the system in their own country. Independent India, for all its efforts, has not still succeeded in changing the British-imposed shackles on our village communities, or restored the sense of pride and self sufficiency among our tax payers.
The citizens of UK and US, on the other hand, believe that Democracy is their invention and that they introduced the idea of 'no taxation without representation'. It is almost as if, the British colonisers came to India, saw the thriving, strong, rural communities, and eventually ended up creating a similar model in their country (or progressed towards this form of governance in their civilisational journey). And left the centralised system to the colonies as their legacy.
I know that my premise can be punched full of holes, but I have a feeling that the comparative models of local self government in India and UK from the 19th century till now, and its socio-economic impact , could form an interesting topic of research for a student of economic history.
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