As one of the first premiers of the Republic said, finance in this country is an all-important and an all-absorbing subject, overshadowing everything else. Even in countries which have a well organized and well regulated machinery, of government, finance attracts the largest part of the time and attention of the legislators. In England, for instance, where the whole fabric of the government, especially in details, runs with clock-like precision, the average tax payer does not grasp clearly the real significance of finance to the government. Just as no individual could live as a member of society without money, just as not a stroke of work could be done if workmen had no wages, and just as no movement or activity in trade would be possible if there were no sufficiency of funds, so no government of even the most rudimentary type could exist for a day if it had not the assurance of the receipt of the necessary funds. The judges who sit on the bench to adjudicate differences between individual citizens, civil or criminal, would only continue to work if they are paid their salary. The policeman whose duty is to prevent crime, detect it when committed, and bring delinquents before the established tribunal, has to live; he and his dependents live on the emoluments that he receives from the government for functioning as an official. Law and order is preserved in the city by the police; in the country by the police as also by the military; and peace among nations is only maintained by the existence of large land and naval forces. To preserve peace, therefore, both within and without, a government has to spend large sums to maintain forces. No public service could be efficient unless the individuals composing it are well educated. Individual effort in this direction does not always bring about the best of results; hence the state has to spend large sums of money to educate the public. The more a nation becomes civilized, the more intricate and vast become the problems of the government; the latter has to incur a very large expenditure and hence has to find the needed money.
The supreme support of the authority of a government is force to enforce justice, and such force entails the expenditure of large sums. It has been the unfailing experience of nations that so long as the constituted authority is able to expend the sum necessary for making its power felt, the state is on sure foundations. Even a judgment of a court of justice is powerful and submitted to by the public, simply because the latter know that if the judgement should be disobeyed it would be enforced by the whole power of the state, both civil and military. The moment the nation finds itself unable to meet the expenses necessary of maintaining its power, anarchy supervenes.
In other words, in order to exercise authority a state must have revenue, and in order to be able to collect revenue a state must have sufficient physical and moral forces to compel recalcitrant individuals to pay their quota of taxes to the state. This is more or less an argument in a vicious circle; but for sufficient education and enough police and military it would not be possible to collect the necessary taxes and maintain a state; but for the collection of sufficient money in the shape of taxes a state could not maintain a proper civil and military organization, as also educate people to respect the laws of the state. Under the conditions of modern civilization the expenditure of a state increases with the progress of years. Under an ideal government expenditure would be so regulated as to be always productive; that is, the sums expended would be devoted towards ameliorating the condition of the poor and facilitating the increase of wealth to the rich, so that by such means the state also benefits eventually. If a government is able to devise means by which the individuals composing it, with or without the aid of foreign help or capital, are able to develop the mineral resources of the country, not only would such individuals benefit but also the state by the royalty it would eventually receive out of such production, and the indirect taxes it would be able to levy in connection with the development of such resources. For instance, if a big mine is opened, thousands of labourers congregate near where they have to work, and such a place grows into a small city. The individuals earn their daily, weekly or monthly wages; apart from necessaries of life they are able to have creature comforts, and the more they earn the more they buy. The proprietors of the mines derive benefit out of the labours of these men; their prosperity depends upon their capacity to retain their labour forces, and they spend large sums in several ways in order to make the labour population contented with their lot. The Government benefits by the rise of this industry in four ways; by the royalty it usually receives on the production, by the income tax it levies upon wage earners receiving annual incomes beyond a certain amount, by the taxes which the production will have to pay in transit, and, lastly, by the customs and other duties on the goods brought by the large number of people who are engaged in developing the industry. Or, let us take another instance where a government undertakes a project of irrigation; the result of such an effort is that large areas of fallow lands are brought under cultivation; not only does the government derive benefit from the selling of water to the land but also from the annual taxation of areas which did not contribute anything in the way of taxation until the project of irrigation was completed. With the progress of time the cultivators of the new areas become prosperous; they buy and sell other commodities and produce, besides the outputs of the land; every such activity gives additional revenue to the government. Thus, in a normal state the prosperity of the individual as well as that of the state by which he is governed - whatever the nature of the government may be - are bound together. It is impossible for a state to continue to be prosperous while the individuals composing it are poor and harassed. There have, however, been instances of rapacious governments continuing to accumulate large reserves and possessing accumulations of wealth, while the people have been miserable and ground down by severe taxation. Such a state of affairs can hardly last any length of time. Even in China, some Emperors under different dynasties are known to have been possessed of fabulous wealth while the people were groaning under the heavy burden of taxation. But on each occasion such a state of affairs was always followed by some sort of a catastrophe by means of which the corrupt state, official or emperor, lost the wealth, and the people made up for years of excessive taxation by not paying anything in the way of taxation for a long while. In the ideal state not only are the individuals and the government equally prosperous, but the burden among individuals is evenly distributed. In actual practice, however, the burden falls on some section or other of the public more heavily than on others. But injustice resulting from such a situation is very much mitigated by the fact that from time to time the burden of taxation is being shifted from one shoulder to the other; a proper study of the progress of taxation in any country will show that during the course of a century the burden usually becomes more or less even.