Financial History of The Dutch Republic - Public Finance

Public Finance

The "constitution" of the new Republic, the Union-of-Utrecht treaty of 1579, tried to lay the basis of a revolutionary new fiscal system. It put in place a rudimentary confederal budget system that charged the Raad van State (Council of State) with drafting an annual Staat van Oorlog (war budget). This budget was presented in a "General Petition" to the States-General for (unanimous) approval.

The treaty next required that the tax revenues for the financing of this budget would be levied "...equally in all united provinces, and at the same rate.". Furthermore, it prohibited internal tariffs and other taxes discriminating against residents of other provinces. Alas, these two latter provisions were never implemented. Instead, the provinces continued the practice under the Habsburg rulers that the provinces paid a fixed quotum (the repartitie) of the budget. Holland's contribution was the norm from which the contributions of other provinces were derived. After some changes the quota were fixed in 1616 as follows (to remain unchanged till 1792): Friesland one-fifth of Holland's share; Zeeland (after some diligent bargaining) 16 percent; Utrecht and Groningen one-tenth each; Gelderland 9.6 percent; Overijssel 6.1 percent; and Drenthe (though not represented in the States-General) 1 percent.

The States-General had only two direct sources of income: it taxed the Generality Lands directly, and the five Admiralties set up under its authority, financed their activities nominally from the Convooien en Licenten levied on trade. Otherwise, the provinces determined themselves how they would collect the revenues to finance their repartitie. Within the provinces there were other quota systems to determine the contributions of the cities and of the countryside. In Holland, the city of Amsterdam was by far the largest contributor (though this was different from Habsburg times, when Delft made the relatively largest contribution), which explained the influence that city wielded, even at the national level.

This system remained in place throughout the life of the Republic. Simon van Slingelandt made an attempt in 1716 to reform it by giving more power to the center. He convened the Groote Vergadering (a kind of constitutional convention) in that year, prompted by the fact that the Generality faced a liquidity crisis in 1715, when most provinces fell into arrears on their contributions. However, this august body rejected all reform proposals, opting instead for "muddling through." Ten years later Van Slingelandt was made Grand Pensionary of Holland, but on condition that he not press for constitutional reforms. Except for a reshuffling of the provincial quota in 1792, a real reform of the system had to wait till after the demise of the Republic. The public debt was consolidated on a national level in 1798, and the system of taxation only unified in 1806.