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How do I deal with taxes?

How did the British Raj/Empire deal with taxes collected in multitude of local currencies of princely states?

  • How was the exchange rate set? How did the Raj deal with exchanging all the taxes collected in local currencies into Sterling Pounds?

  • Answer:

    My guess is that most of the tax was collected in commodities such as Indian cotton (that replaced American cotton after America's independence) to be used in British mills or hard currencies such as gold/silver that went to East India company's and later British treasury. If the tax were collected in grains or salt (which accounted for 10% of the revenues), most of them were sold to local trader in return for hard currency.  India neither had a central bank nor had paper based currencies during the East India company. The currency used was the silver "rupee" coin originated in the 15th century. It is interesting to note that unlike other major economies that were based on a gold standard, India always had a silver standard. http://en.wikipedia.org/wiki/Indian_rupee#India

Balaji Viswanathan at Quora Visit the source

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What everyone missed here was that a Mughal Emperor ,in return to a British Doctor , saving his life allowed Britain to use it's own coinage in India.During those times,people away from the capital used to recognize their kings from the engravings on the coin . So the mughal emperor committed a mistake by allowing Britain to use their own coinage while trading with India. As for taxes,they were collected in kind or in the form of their own coinage or else gold and silver. And till 1965(around that period),this coinage was used by Arab countries before they dumped it,which explains partially why India was forced into war with Pakistan in 1965.

Prashant Singh

The coins the EIC recieved they paid out to the thousands of locally hired sepoys, agents and factory labourers in whichever Presidency they were in, along with being used to purchase local supplies, and bribe rullers, so not an issue if they were Bengal: Rupees, Anna, pice, pie; http://madraspresidency.blogspot.co.uk/: Pagodas, Fanams, Cash; https://en.wikipedia.org/wiki/GuangzhouTales, https://en.wikipedia.org/wiki/Bengkulu dollars; Bombay: Rupees, anna, pice, paisa; https://en.wikipedia.org/wiki/Mocha,_Yemen dollars, https://en.wikipedia.org/wiki/Travancore: Fanams...... Latter, as others have said they started to introduce a common local currency to the territory they controlled / administered, purely to simplify administration / book-keeping, and to make cross subsidies between presidencies possible. But again the coinage remained in the locality.The EIC made its money on trading / shipping goods, and the Crown on duty and taxes on those goods in the UK, so there was virtually no shipment of coins outside of the region. If you ignore examples of every coin in circulation ending up in a number of museums, and in a few private collections.

Andrew Roberts

Taxes were collected in silver rupees or gold bullion. The rupee was standardised. It doesn't matter if you print your own notes - you pay a figure in silver or gold.Please remember that currencies didn't used to be paper - they were a precious metal. The exchange rate was set by the size of the coin and it's purity.Silver and gold has stable values of 15 1/2 to 1 until 1871. It doesn't matter which you collect in. The tribute of the subject states was set by treaty. http://www.historydiscussion.net/history-of-india/indian-currency-system/5-main-standards-of-the-indian-currency-system/5980 Before 1818; 994 coins of both gold and silver and of varying weight and fineness circulated. Bimettalism (gold and silver coins) introduced at this stage. The Currency Act of 1835  which made silver rupee weighing 180 grains (tory)11/12 -ths fine (containing 165 grains of fine silver) as the sole unlimited legal tender throughout British India. 1841; This was unpopular with the EIC so  Government of India encouraged coinage of gold since it brought revenue in the form of seignior age (a percentage on melted bullion). By a proclamation issued in 1841, gold mohurs were accepted in public treasuries at the rate of one gold mohur equal to 15 silver rupees But due to new gold discoveries, it became over valued - after 1 January 1853, no gold coins of any sort would be received by public treasuries within the territories of the EIC. Anyway, read the article. It carries on.

Chass Hiikie

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