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By Ramses H Abul Naga,  Reader in Economics, University of Aberdeen,  2018-2019 IMéRA fellow in partnership with AMSE – Aix-Marseille School of  Economics.  Egypt has struggled in recent decades to sort out its public finances. The current public debt to GDP ratio stands at 97%, and had reached a 150% figure in the 1980s. Though similar data are not available for earlier centuries, accounts provided by historians would support the view that if Egypt did not always have a debt problem, its rulers may have severely impaired its economy because of a poor design of its taxation system. In the three centuries preceding the French expedition of 1798-1801, Egypt was an Ottoman province administered by the Mamluks. The local Egyptian population was not called upon to participate in the Ottoman war effort. For this reason, the Ottoman rulers’ primary concern was not to raise a local army but to extract as much tax income as possible from the Valley of the Nile. Most taxes would then be directed to the war effort; indeed the American historian Stanford Jay Shaw quotes that the 19th century modernization of the Ottoman army may have consumed up to 70% of the Empire’s public budget. Because the largest share of domestic output was agricultural, tax revenue was bound to fluctuate a great deal from one year to the next. The Ottomans did not invest much effort in developing the public administration of remote provinces, and their preferred method of securing revenue in Egypt was to recruit Multazims to collect taxes for them. According to accounts from the French expedition, it would appear that the multiple levies inflicted upon Egyptians taxed away all farming surpluses and left peasants in a bare state of subsistence. So high were the taxes levied by the Mamluks perceived to be, that on 1 July 1798, upon landing in Alexandria Napoleon Bonaparte declared to the Egyptians that “I come to restore your rights”, and, “punish the usurpers…”It is difficult to assert the level of that tax rate. The Middle East historian Roger Owen for instance quotes a bracket of 10% to 50% on annual farm production and a similar tax on livestock. The tax was most probably collected in kind rather than in money. On top of the taxes levied by the Multazim, there were taxes paid to the provincial governor, a land tax, and taxes dues to the local Sheikh and village headmen. The eighteenth century Egyptian scholar and historian Abdel-Rahman Al-Jabarti noted that after-tax output was just enough to maintain farmers in subsistence. Jean-Lambert Tallien, working in the political economy division of the Institut d’Égypte during Bonaparte’s expedition, took the view that the effective tax rate may have exceeded 67%. There were regional variations in taxation, with remote farms from the capital paying considerably less. This was particularly the case in parts of Upper Egypt, further afield from Cairo, where Multazims perceived the cost of sending armies to be prohibitively high. According to multiple historical accounts, it would therefore appear that the multiple levies inflicted upon Egyptians taxed away all farming surpluses and left peasants barely subsisting. The taxes were harmful to the economic expansion of Egypt in several ways. Firstly, exceedingly high tax rates distorted the incentives of farmers for production and effort. Secondly, output choices made by farmers were distorted against risky but potentially profitable crops, because of the need to meet the required tax obligations. Thirdly, while amongst the intended uses of tax receipts were investments in maintaining irrigation systems and local infrastructure, Multazims were left free to use proceeds to build up private armies for the purpose of coercing farmers and punishing evaders.As a general rule, neither Egyptians or Ottoman rulers benefited from this tax system as Multazims took most of the proceeds, bought farm land for their personal income generation, and returned very small shares of their tax revenues to the Ottoman rulers. The practice of tax farming was an instance of disastrous public management, and is commonly referred to in modern terminology as a problem of government failure. Likewise, the failure of the administration to maintain safe passage to caravans and to develop roads and waterways was a major obstacle to the expansion of Egypt’s trade with Africa, the other Ottoman provinces and Europe. It is no surprise then to learn that the person to whom the Ottoman ruler handed over the administration of Egypt after the withdrawal of Napoleon’s troops was a former tax collector of the Macedonian city of Kavala. Though Mohammad Ali Pasha and his dynasty did spend tax receipts in modernizing Egypt, taxes continued to be extorted from Egyptians throughout the 19th century, providing little in the way of financing the country’s expanding public spending. Egypt consequently experienced a major debt crisis that culminated in 1876 to the establishment of the Caisse de la Dette Publique, and the loss of sovereignty through the concession of Egypt’s ministry of finance to the British, and the ministry of public works to the French. Finally, the toll of the indebtedness culminated in the removal of Khedive Ismail in 1879, and the British occupation of Egypt between 1882 and 1922.