00074918.2014.896245

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Bulletin of Indonesian Economic Studies

ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20

From Revenue Farming to State Monopoly:

The Political Economy of Taxation in Colonial

Indonesia, 1816–1942

Abdul Wahid

To cite this article: Abdul Wahid (2014) From Revenue Farming to State Monopoly: The Political Economy of Taxation in Colonial Indonesia, 1816–1942, Bulletin of Indonesian Economic Studies, 50:2, 294-295, DOI: 10.1080/00074918.2014.896245

To link to this article: http://dx.doi.org/10.1080/00074918.2014.896245

Published online: 30 Jul 2014.

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294 Abstracts of Doctoral Theses on the Indonesian Economy

elites to managerial-expert elites. It also allowed the military to participate in the new managerial class, by providing new managerial posts for army personnel and developing appropriate army doctrines for a military-dominated managerial state. This dissertation argues that the new institutional and personal relationships between Indonesian and American experts and the import of new ideologies

like scientiic management, public administration, and modernisation theory

supported the rise of a developmental managerial state that was state-led and illiberal. It analyses Indonesia’s institutional and ideological development as an almost typical, textbook example of the rise of Third World managerial state. It argues that the shift from Sukarno’s Old Order (1950–65) to Soeharto’s New Order (1966–98) must be understood as part of this development.

The rise of the New Order developmental state was often viewed as a resur-gence of the colonial state. This dissertation challenges that view by positing the

importance of placing the Cold War context in a dominant position. The rise of

a managerial class composed of academics and civilian and army managers, and supported by the military and its proxies, was an institutional development that began in the early years of independence. The New Order state continued a series of institutional changes proposed by Sukarno in his Guided Democracy regime and supported by experts and their idea of using retooling, indoctrination, and traditional culture as instruments of control. Sukarno’s effort to maintain both the revolutionary project of national independence and the expert project of state-led development and growth ended in tragedy.

Similar to the Communist generational shift between the so-called reds (revo -lutionaries) and experts (administrators and bureaucrats), the generational shift

in the Indonesian elite signiies the universality of the process and points to the importance of looking at Third World, Cold War development as a shift from

a revolutionary and participatory ideology of people-led revolution towards a managerial ideology of state-led development—an ideology that was supported

by both the West and Communist countries because of its universality. The rise of

the unexpected and relatively successful New Order developmental state and the equally unexpected rise of violence and mass deaths accompanying it should be understood in the context of this managerial state and its managers.

http://dx.doi.org/10.1080/00074918.2014.938411

From Revenue Farming to State Monopoly:

The Political Economy of Taxation in Colonial Indonesia, 1816–1942 Abdul Wahid ([email protected])

Accepted 2013, Utrecht University

This thesis reviews the history of the tax system in colonial Indonesia, and in Java in particular, by examining the social, political, and economic consequences of changing the way it generated revenue. It focuses on the transformation at the turn of the twentieth century of the pachtstelsel, or revenue farming, a

tax-collecting system involving private parties (mainly ethnic Chinese businessmen)

that had been in practice throughout the nineteenth century, into a regiestelsel, or

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Abstracts of Doctoral Theses on the Indonesian Economy 295

state monopoly, involving state-collected taxes. Both tax systems constituted a large part of the taxes introduced not only in Java but also in Sumatra and other islands, and during 1816–1942 these systems contributed substantial revenue to the state.

Revenue farming, which consisted of opium tax farms and about 16 small tax farms, delivered revenue of more than 10% of total government revenue per dec-ade throughout the 19th century. Yet this success came at a very high social cost;

revenue drain, bureaucratic corruption, ineficiency, popular exploitation, opium

addiction, and violence were among the reported effects. State-sponsored

inves-tigations in the early 1890s conirmed that tax farming was out of control because it gave too much power to ethnic Chinese tax farmers, allowing them to build ‘a

state within a state’ and overshadow the colonial administration. Therefore, in the mid-1890s the colonial government reformed the tax system, abolishing tax farming and introducing the regiestelsel and state-collected taxes, using its formal bureaucracy to control tax collection.

Under the auspices of the ‘Ethical Policy’, the newly reformed tax system was

intended to be more eficient and just, and able to support state programs to

improve indigenous welfare by, for one, minimising the possible adverse effects of tax collection. Until the end of the Dutch colonial period, however, the new

tax system had only mixed success. From a inancial and administrative point

of view, both state monopolies and state-collected taxes generated increasing revenue for the state before being checked by the 1930s depression. Yet the new system did not end the old problems of corruption, smuggling, and opium

addic-tion, or mitigate the new problem of unjustiied tax burdens on different popula -tion groups. These failures were attributed to the half-hearted commitment of the colonial state to implementing the ethical programs and to the lack of political

autonomy from the ‘metropolis’, which often intervened in iscal policymaking.

As a result, the reform of the tax system, and the state administration in general,

beneited the colonial state more than it did Indonesian society.

This thesis sees the change from revenue farming to state monopoly not merely

as a part of the modernisation of the colonial state but also as a relection of the

changing nature of the state itself and its relation with society. Built on a critical framework that views the colonial tax system as a power struggle between the government, its agents, and the taxpayers, it offers a fresh understanding of the colonial state, its daily practices, and its institutional legacies in modern Indone-sia.

Struggling out of Recession:

The Inluence of Crisis on Economic Performance and Welfare in Java

Sukamdi ([email protected])

Accepted 2013, Radboud University Nijmegen

Few studies of Indonesia’s economy focus on districts and households when examining the effects of inancial crises and macroeconomic transformation, or

when establishing links between their macroeconomic and microeconomic effects.