Kautilya’s thoughts about taxation policy:

• Kautilya gave clear principles of taxation that a state should follow. These principles include short term and long term tax policies, tax limits and tax rates that a king may impose.
• He also gave provisions for increasing tax rates during emergencies.
• As per Kautilya, the king should collect taxes from citizens as ripened fruits are collected from orchards while keeping in mind the economic ability of citizens to pay taxes.
• His taxation policy was such that it made the taxation process simple and less expensive.

Kautilya suggested the following types of taxes in the tax structure:

1. Land tax:

• Kautilya had framed rules to decide the proportion of taxes. He framed these rules on the basis of the type of land, its productivity, type of product produced, availability of irrigation facility and irrigation type.
• He also proposed tax exemptions as an incentive to increase productivity.

2. Import-export taxes:

Kautilya classified import-export taxes as follows:
(a) External charges (taxes): For goods produced in the country.
(b) Internal charges (taxes): For goods produced in the state or the capital.
(c) ‘Aatithya’ charges (taxes): For goods imported from foreign regions or states.

• Kautilya gave rules for putting taxes on various commodities on the basis of type of goods and their importance in economic life.
• He also proposed setting up booths for collecting customs and octroi.
• He also proposed rules for road tax and wealth tax.