In these days of excessive public expenditure and consequent demands for revenue, fiscal authorities of all political units are anxious to discover untapped sources of funds, and, if such are discovered, to determine the most successful way of making them productive. Business and license taxes are one of these sources which have been used only to a small extent in the United States, except in certain sections, until comparatively recent years. Other countries have preceded in the use of these taxes, and have worked out detailed systems, some of the successful of which can be noted with profit by American students, since this method of taxation doubtless will be extensively used in the future.

Business Taxes in France. - The system of business taxes which had been worked out in France before the Great War represents, perhaps, the most thorough and detailed development in fiscal machinery of this nature. Only the briefest outline of the plan will be attempted here. Certain definite principles are recognized, and these are embodied in the formulation of the schedules. It is assumed, in the beginning, that certain forms of industry are more profitable than others; that even in the same class of industry profits vary directly with the population; that the profits of a manufacturer or merchant will ordinarily vary directly with the size of the site which is occupied; and that the kind of residence which the business man occupies is often an indication of his business success.

In arriving at the tax assessment, two classes of rates existed - the fixed and proportional. To arrive at the former three schedules were used. Schedule A includes merchants and professional classes. The merchants are further classified as to the nature of the business, whether it be wholesale, retail, or a combination. After the determination of the kind of business, then it must be placed in one of the nine classes according to population. Schedule B includes bankers, department stores, transfer companies, etc. The classifications in this group are based upon the population of the town where the business is located and upon the number of persons employed.

Industrial establishments are placed in Schedule C. Population is not used as a criterion of classification here, but a fixed rate is levied upon each industry of the same kind, while a variable rate is based upon the amount of profits. In addition to these schedules another tax is assessed, which is based upon the site value of the residence of the individual, together with the value of the site used in his business. Certain classes, such as lawyers, physicians, and others of a similar nature, are subject only to this latter tax.

Tax in Prussia. - For many years Prussia used a similar method of taxing business organizations, but in 1891 the basis for classification was remodeled. Population of the place in which the business was located was no longer used as a principle in classification, neither were the industries divided into classes because of the nature of the business. The entire classification, under the revised plan, is based upon the capital invested and upon the annual earnings. The earnings are used as the primary basis of classification, with capital as a modifying factor, in dividing industries into four classes, and the tax is so graduated as to take about 1 per cent of the earnings.

The French system appears exceedingly complex, but does possess some advantages. The business man or his business is subject to no investigation by fiscal officials, and consequently the tax is not unpopular. The tax, moreover, is not upon actual earnings, but upon what should be earned, ordinarily, under given conditions. The tax penalty is not upon the enterprising entrepreneur of a particular class, but upon the laggard. The necessity of relying upon declarations of the taxpayer is also eliminated. Many inequalities doubtless have arisen, yet the advantages somewhat compensate for them. The system has been productive and provided no small part of the pre-war revenues.