Taxation has shaped civilisation from ancient Mesopotamia to modern Australia. Understanding its long history sheds light on why our system is so complex — and why it still matters today.
For most people, taxation is an unavoidable annoyance — something that happens behind the scenes of a payslip, or looms once a year during tax season. Tax, in fact, has been with us for as long as civilisation itself. It is one of the oldest tools of organised society. Understanding the long history of tax helps place today’s system — including Australia’s complex income tax laws — in context.
The origins of tax: Early civilisations and bureaucracy
The first known taxes were collected in Mesopotamia around 3000 BCE and weren’t paid in money — there was no currency yet — but in crops, livestock, or labour.
Farmers would deliver a share of their harvest to the ruling classes, or to temple storehouses. These early systems were simple in concept but sophisticated in administration, often recorded on clay tablets using some of the earliest known writing systems.
In ancient Egypt, tax collectors operated under royal authority and assessed grain yields to ensure the state could plan and provision. In China, as early as the Zhou Dynasty (1000 BCE), land taxes and corvée labour obligations (unpaid labour owed to the state) supported vast public infrastructure projects and military campaigns.
Ancient empires, including those of Greece and Rome, developed taxation into a central mechanism of state power. Roman citizens were taxed on property, land, goods, and even manumissions (freeing of slaves), while provinces paid tribute to fund the growing demands of the empire. Tax was both an economic necessity and a political instrument, used to exert influence and maintain control.
Feudalism and the birth of modern tax systems
During the medieval period in Europe, taxation was decentralised. Kings and nobles extracted taxes in kind — food, livestock, and manual labour — often arbitrarily and without a consistent legal framework. The absence of regular systems led to unrest and revolts, particularly when taxes were levied to fund unpopular wars.
Avoidance or refusal to pay taxes was often a form of resistance against foreign overlords. In many Ottoman-occupied regions where Greeks lived, tax evasion reflected deep mistrust and disdain for the occupiers. This mistrust was so entrenched that some argue the widespread tax avoidance contributing to Greece’s economic crisis a decade ago was, in part, a legacy of behaviours developed during 400 years of Ottoman rule.
As societies became more urbanised and their economies unceasingly monetised, monarchs, or the state, moved towards more formalised systems. In England, the 1215 Magna Carta, which King John was forced to sign, placed early limits on the king’s ability to impose taxes without consent — an important step in the emergence of parliamentary control over public finance.
Across the globe, similar transitions were taking place. In India, the Maurya Empire had codified taxes on land and trade as early as the 3rd century BCE.
In Japan, tax collection systems became more structured under imperial rule. Wherever states became more complex, so too did their revenue systems.
The rise of income tax
The modern idea of taxing income — rather than just land, goods, or trade — emerged in the late 18th and early 19th centuries. Britain introduced an income tax in 1799 to help finance the Napoleonic Wars. It was controversial and was repealed and reinstated multiple times. But by the mid-1800s, it had become a permanent fixture.
The key idea behind income tax was that those with greater earning capacity should contribute more. This concept — progressive taxation — would go on to underpin many contemporary tax systems, including Australia.
Taxation in Australia: Colonies to Federation
Before Federation in 1901, Australian colonies collected their own taxes, mainly through customs duties and or other forms of taxes. Income tax was introduced at the state level in the late 19th century, with varying rates and rules across different jurisdictions.
In or around 1915, during World War I, the Commonwealth Government introduced a federal income tax to raise funds for the war effort. This new national tax coexisted with state income taxes for several decades, creating administrative overlap and confusion.
That changed in or around 1942, when, during World War II, the Commonwealth assumed exclusive control over income tax. It offered states financial compensation in exchange for giving up their taxing powers. This centralisation, originally intended as a wartime measure, became permanent — and remains the basis of Australia’s tax system today.
Modern Australian system: Structure, scope and scale
Australia’s income tax system is governed by two main statutes: the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997. The first is the legacy legislation; the second was meant to modernise and simplify it. But rather than replacing the older law, the 1997 Act added to it. As a result, taxpayers must often consult both — a source of considerable complexity.
The system taxes individuals progressively — meaning higher income earners pay a higher percentage of their income — and includes a separate set of rules for companies, trusts, superannuation funds, and non-residents. It covers wages, business income, capital gains, rent, interest, dividends, and more.
Tax revenue today funds critical services: health care, public infrastructure, education, pensions, disaster relief, and defence. In other words, tax is the foundation of the modern social and economic safety net.
Enduring tensions: Compliance, complexity, and fairness
While the basic principles of tax — raising revenue, sharing burden, and funding collective needs — have been consistent throughout history, the methods have always been contested.
Today, Australians face a highly complex legal framework. The legislation runs to thousands of pages, supported by an equally dense body of administrative rulings, case law, and regulatory guidance. Many taxpayers require professional advice just to comply with basic obligations.
This complexity raises concerns about fairness. High-income individuals and multinational businesses often have access to sophisticated tax planning, while ordinary Australians navigate the system with limited resources and time.
At the same time, debates over who should pay more, how much, and in what form continue to dominate political discourse — just as they did in ancient and early modern societies. Questions about tax justice, redistribution, and economic incentives are perennial, not new.
It matters
Understanding taxation in historical context gives us perspective. It reminds us that tax is not just a burden or technical exercise, but a core part of what binds a society together. It reflects how we distribute resources, make collective choices, and balance individual contribution with public good.
Australia’s tax system is not perfect. It is ripe for simplification, and arguably due for deeper reform. But it sits within a tradition that stretches back millennia — one that shows taxation is not a glitch in the system. It is the system.
As we debate changes to tax law or consider future reforms, we would do well to remember that taxation is not just a feature of government. It is one of its oldest and most important tools — a tool that, when designed well, makes a fair and functioning society possible.
*Tony Anamourlis is a tax law specialist in multinational transactions, negotiating with the Commissioner of Taxation and other regulators and is a regular contributor to Neos Kosmos.
