Coll 28/3(2) ‘Persia. Financial situation.’ [‎306r] (611/817)

3
It is to be expected that in the undeveloped
eountdlgtee or the Middle 3ast the Government will
be obliged to rely in great part for its revenue
on the produce of indirect taxation, but in Persia
the principle has been unscrupulously pushed beyond
the bounds of decency, not so much because of the
administrative difficulties that beset the collect
ion of direct taxes as because the legislature and
the administration are recruited from th<fese sections
of the community on whom direct taxation would main
ly fall.
(c) ’Profits on Government Trading’ (item C.a) of Re
ceipts in the Summary above) constitute another
large element of indirect taxation, and this item
throws still more into relief the unfair incidence
of taxation as between the rich and the poor. (I
have reason to believe that the receipts from this
source are grossly over-estimated at Rials 1,040
millions. But the argument is unaffected even if
the yield is only half of the estimate.^
(d; Of the total of Rials 2,299.48 millions allocated
to the ’Supply’ Services, 40" is accounted for by
the following three items:-.
Army 700.—
Gendarmerie ••••••••• 150.—
j olice 90.—
T otal: .... 94lT.-~
Note s Tho admin!etrative coats of the Ministry
of the Interior appropriate to the Gendarmerie, and
the costs of adminis t^^ing the Conscription Law
are not included in the aboye figures.
While it is to be expected that the costs of
maintaining security in a country still largely in
habited by a tribal population will absorb a large
part of the national budget, there is no doubt that
Persia does not get anything like value for the sum
she expends on her security services. A conscript
army on the continental model is a luxury and an ex
travagance, and the existence side by side of
two forces, the Army aid the Gendarmerie (neither of
which is ever likely to be needed, or to be effective,
for any purpose except the maintenance of internal
law and order) is wasteful in the extreme. Dr.Mi11s-
paugh has his eye on the Army A>timates, but he will
encounter much onposltion from the Palace to any at
tempt at retrenchment.
(e) The provision of Rials 54.41 millions for the Ministry
of Health and of Rials 177.30 millions for the Ministry
of Education (a total of Rials 331.71 millions) in
dicates how little of the proceeds of the Government’s
exactions from the people goes back to them in the
form of Goeial Services.
7. Dr.Millspaugh informs me that he is determined that
the Budget for the coming year shall be balanced. He says ho can achie*
achieve this only by substantial cuts in expenditure and by substant
ial increases in taxation. He thinks that indirect taxation is at
as high a level as the country can stand, and ha therefore proposes
to introduce new measures of direct taxation. Pawed as he is with
the need to increase taxation in order to balance the Budget, it
is unlikely that he will find it possible politically to introduce
further taxation for debt extinction on any serious scale or for
loans to the Allied Governments. The utmost that can be looked
for from the forthcoming Budget, by way of a contribution towards
arresting inflation, is, therefore the extent of the relief that
will/