CHAPTER XIII.

THE REVENUE AND EXPENDITURE OF CEYLON.

Chief Sources of Revenue :-Grain and Customs Dues, Sales of Crown Land and Railway Profits-Taxation and Revenue.

UNTIL

1828 there was an annual excess of expenditure over revenue in Ceylon but between 1829 and 1836 the balance was on the right side, owing chiefly to a series of successful pearl fisheries. From 1837 to 1842, and again from 1846 to 1849, expenditure once more exceeded revenue; but from that time there was a surplus, and the amount of revenue quadrupled within twentyfive years, owing to the rapid development of the planting enterprise-the sale of Crown forest lands largely contributing until in 1877 it attained a maximum of Rs. 17,026,190. After that, owing to the falling off in the coffee crops, the revenue went down, until in 1882 it reached Rs. 12,161,570. Then a gradual recovery set in, but there was no marked improvement until the Tea enterprise became fully established in 1887-8. Since then the improvement has been most marked, so that for 1891 the revenue reached the unprecedented amount of Rs. 17,962,710 (partly owing to a successful pearl fishery), while that for 1892 is (without any fishery) likely to equal the revenue of 1891. The case may be different for 1893, and succeeding years, owing to unwise interference with Land Revenue noticed farther on. At the same time, owing to the depreciation of the "rupee," the

cost to the Ceylon Government of its remittances to England for interest on debt and other charges has greatly increased, and is estimated for 1893 at 5 millions of rupees.

The main sources of the Ceylon General Revenue are found in import duties on the rice imported from India for feeding the coolies and others directly or indirectly connected with the great planting enterprise of Ceylon,

including a large proportion of the urban population. This import duty also bears on all the population of the big towns, and on a considerable proportion of that of the villages. The Sinhalese and Tamil rice cultivators barely grow enough grain to support themselves and their dependents. To balance this import duty (or rather previous to its existence) there has hitherto been an excise collection on locally-grown grain by means of a Government levy, the remains of the old tithe or rent paid to the native kings. This rent had been greatly reduced of late years by the application of commutation, so that the import duty on grain had become decidedly protective of local industry. But not content with this, it pleased Lord Knutsford, as Secretary of State, and Sir Arthur Havelock, to abolish the internal grain levy or "paddy " rent altogether from January 1st, 1893, without, however, touching the corresponding Customs duty. This impolitic, unwise step, and its certain consequences, are fully discussed in Letters in Appendix No. X., and in a few remarks at the end of the chapter. The other most productive import duties are those on wines, spirits, hardware, and cotton goods. Altogether the Customs bring in between a quarter and a fifth of the entire revenue. The annual income from the railways, all held by the Government (and 122 out of 204, shortly to be 270, miles the free property of the colony), now makes up as much of the general revenue as do Customs duties, or nearly one-fifth of the entire revenue. "Licences" (to sell intoxicating drinks, chiefly arrack) unfortunately yield between one-eighth and one-ninth of the total; and the "Salt-tax" and "Stamps" together make up oneseventh of the general revenue. Sales of Crown lands, chiefly to planters, used occasionally in former years to be as productive as the Customs, but latterly the extent of land offered for sale, and the consequent revenue,

have greatly fallen off. Among the rules guiding the Forest Department formed of recent years is one prohibiting the sale of Crown forest land 5000 feet above sea-level and upwards, or on the ridges of mountains or banks of rivers below that height.

It is felt now that a great mistake was made fifty years ago in not keeping the proceeds of land sales in a separate fund as capital to be expended in reproductive public works, apart from the general revenue. The same may be said of the surplus of the large railway receipts after providing for working expenses and interest on debt with sinking fund. Had this been done, the expenditure on fixed establishments would not have been allowed to increase year by year, as if the general revenue from Customs, land sales, and railway profits, dependent on the planting enterprise, were a permanent source of income. The railway profits were for many years almost entirely due to the carriage of coffee from the interior to Colombo, and of rice, general goods, and manure for the plantations. Now tea (and tea requisites), with cocoa, cinchona bark, cardamoms, and other new products, with a small quantity of coffee, make up the main freight on the line. In addition to the Customs, the railway profits, land sales, the excise on the sale of spirits, stamp duties, and the monopoly or tax on salt, as the main sources of revenue, we have an occasional contribution of from Rs. 100,000 to Rs. 1,000,000 from a pearl fishery. The latter is one of the most acceptable, but one of the most uncertain, sources of Ceylon wealth. The year 1891 gave nearly a million of rupees from this source; but no further fishery is expected for some years, owing to the oysters disappearing from the banks.

Taxation and Revenue in Ceylon.

Special reference is required to the unwise abolition of

the paddy rent--the oldest of Sinhalese revenue leviesby Lord Knutsford on the advice of Governor Havelock after one year of office, and against the opinion of five previous Governors, and a nearly unanimous Civil Service. The latter considered that the one food tax should not be abolished till the other, the import duty on rice, could also be given up, and both in favour of a General Land Tax. These levies were condemned by the Commissioners of 1832, by Emerson Tennent from 1845 to 1860, and all concerned looked forward to their removal so soon as the work of popular education and railway extension were further advanced. But no one contemplated the removal of the one without the other-so establishing most considerable protection against some of the poorest, landless and doubly taxed natives-nor that the paddy rent (however much modified) should be abolished, until a light, general land tax were ready to take its place. Governors Robinson, Gregory, and especially Gordon, devoted the net proceeds of the paddy rent almost entirely, to restoring and improving irrigation tanks and channels for the benefit of the very cultivators concerned; there was no complaint from purely native districts, though in consequence of the failure of coffee, which beggared hundreds of planters, certain paddy cultivators unable to pay rent were evicted, many of them finding employment on tea plantations in other districts. To meet such cases and afford still more relief, Sir Arthur Gordon's Commission had prepared very liberal modifications, remitting rent on the poorest lands, but maintaining an inland collection to justify the Customs duty until such time as a general land tax could be conveniently introduced. But this was swept aside and total abolition of the inland rent ordered by the Secretary of State, from 1st January, 1893. so leaving Ceylon without a rupee of Land Revenue, the mainstay of the Revenue of India, and emphasising