Markets and Taxation Modern Taxation Pri

11 91
Markets and taxation: modern

taxation principles and the school
of Salamanca1
Perdices de Blas, L. (2011). “Markets and taxation: modern taxation principles and the
school of Salamanca”, EsicMarket, Vol. 138, pp. 91-116.
Revuelta López, J. (2011). “Markets and taxation: modern taxation principles and the school
of Salamanca”, EsicMarket, Vol. 138, pp. 91-116.
Abstract
Tax systems influence the decisions of private agents. Because of that their
evolution and the principles that govern them determine to some extent
economic development. Modern tax systems existing in the developed
countries follow broadly the principles enunciated by the German econo-
mist Fritz Neumark. In this article we will analyze how the evolution of
these principles can be traced back to the School of Salamanca, in the
XVIth century. To do this we carried out a comparative analysis with the
aim of determining what modern taxation principles were developed by
theologians-jurists of the School of Salamanca. The results show that at
least half of Neumark’s eighteen principles were already known by the
scholastics of the School of Salamanca.
Key words: School of Salamanca, history of economic thought, Neumark,

tax principles.
JEL codes: B11, H20, N43.
Luis Perdices de Blas

University Complutense of Madrid
Julio Revuelta López
University of Cantabria
january · april 2011 · esic market [91]
Electronic copy available at: http://ssrn.com/abstract=2172318

92 11 markets and taxation: modern taxation principles and the school
of salamanca
1. Introduction
This article stems from the convergence of two notable issues that have
occupied historians and economists independently: on the one hand, the
guiding principles of modern systems of taxation, and on the other, the
School of Salamanca. Regarding the first question, no economist can
ignore the importance, past and present, that tax systems have for agents,
both private and public, their decisions and the effects they produce in the
market. Throughout history, all Treasuries have needed revenues to meet
their needs. The way to extract these resources from private agents has
been a key factor in the development of an economy that can favour the
development of a country or, on the contrary, its decline, thereby affecting
the decisions of companies and of households. Hence any historical reflec-
tion on this matter will help to correct deficiencies in current systems2.
As for the School of Salamanca, there is an extensive historiography
which has not always been taken into account by economists. They may
not be aware of the contributions made by the members of the School of
Salamanca, but instead, they become familiar with some of their ideas,
which ended up becoming an integral part of the knowledge base of vari-
ous schools of thought to the present day. Although since the nineteen-
fifties many studies have acknowledged the contributions to economics of
Francisco de Vitoria, Domingo de Soto, Martín de Azpilcueta and Juan de
Mariana, among others, there are historians who maintain that the School
of Salamanca did not exist or, having done so, that its work can never be
considered to be within the field of economics. Precisely, one of the pur-
poses of this study will be to contribute another grain of sand towards the
recognition of the role of the School of Salamanca in the creation of eco-
nomics, and in the analysis of markets, which developed more fully from
the eighteenth century. In addition, we will do this looking at their fiscal
doctrine, which is one of the least studied areas of the School.
Therefore, if we pool both issues we will be able to answer the question
that motivates this research: was a significant contribution made by the
School of Salamanca, in its time and to the present day, in the field of tax-
ation and its relationship with the market? We hope that after reading this
paper this can be answered affirmatively, as the following pages will pres-
[92] january · april 2011 · esic market
Electronic copy available at: http://ssrn.com/abstract=2172318

markets and taxation: modern taxation principles and the school 11 93
of salamanca
ent the fiscal doctrine of these late scholastics, remembering the historical
and institutional context in which they lived, very different from today,
and seeking to make comparisons with taxation principles that support
current tax systems.
This paper has two main sections, in addition to this introduction and
the conclusions. In the second section we provide an overview of the
School of Salamanca and in the third we undertake a comparative analy-
sis between modern taxation principles and doctrine of the School of Sala-
manca. Finally, in the conclusions, seeking to respond to the question that
motivates this article, we present the main contributions of the School.
We would not want to end this introduction without recognizing the
pioneering work in the study of ideas on taxation of the School of Sala-
manca, and their impact on the economic decisions of agents, carried out
by Gonzalo Higuera in 1963, and in more depth, by Javier Gorosquieta in
1971. Their research has helped us to see a little further like dwarfs astride
the shoulders of a giant.
2. A general overview of the School of Salamanca

2.1. The roots of the School of Salamanca
The late Spanish scholastics grouped around University of Salamanca and
their central figure Francisco de Vitoria were inspired by various sources3:
the ancient Greek philosophers, Roman law and canon law, and finally the
three major monotheistic religions, in particular Christianity.
The Greek philosophers who influenced the thinking of the School of
Salamanca include Xenophon, Plato and, above all, Aristotle. The reflec-
tions of these great Greek philosopher reached Vitoria through Islam4, to
be picked up by Thomas Aquinas5. The main contribution of Plato to late
scholastic thought was the definition of fair price. However Aristotle was
more influential, conveying the distinction between the concepts of econo-
my and chrematistic6, defining the legal price and natural price7, consider-
ing need as the result of the exchange (making a subjective approach to
value8), as well as the ownership of the goods separating their domain and
tenure, and finally defining the origin and functions of money.

of salamanca
With regards to the Law, canonic or Roman, it is likely to have influ-

enced the thinking of the School of Salamanca, since its members, or those
who came under its influence, had devoted themselves to the study of the-
ology and law. This line of thought is also found in St. Thomas, undoubt-
edly the main influence on Vitoria, and his followers. But it would be
unfair to forget other scholastics, such as Raimundo de Peñafort, who con-
tributed to increase the influence of law in the minds of the Salamanca
Doctors.
As already noted, the three main monotheistic religions played a vital
role in the development of economic ideas of the late Spanish scholastics.
They were theologians. The Bible, the Talmud and the Koran (this last
book may have had less influence) acted as guides to thought, reinforced
by the writings of the philosophical and ecclesiastical authorities.
It is easy to see that all the sources so far mentioned are interrelated.
We cannot understand the School of Salamanca by isolating them and try-
ing to identify the weight to attribute to each. The evolution of ideas over
time was an amalgamation of all that came before through the scholastic
tradition inherited by Spanish theologians. At this point, it is necessary to
point out that the scholastics did not present a unified point of view. On
the contrary, while on many ideas they agree, which is perfectly logical,
since they use the same sources and have the same goal, in many other cas-
es they present opposing views, as we will go on to see.
Before Thomas Aquinas other scholastics had taken up these sources of
thought (this is the case of Peter Lombard, Raimundo de Peñafort, Alber-
tus Magnus and Henry of Ghent9, among others), but it was the Summa
Theologica, the foundation of Thomism10, the synthesis that made the
most of these sources and exerted the most influence on medieval scholas-
ticism and the Modern Age and, therefore, also on the School of Salaman-
ca. Through this work, St. Thomas established the distinction between use
and exchange value in goods, that is to say, subjective value, the concept
of fair price, and the condemnation of usury11. After him, many other
scholastic thinkers left their mark on the School of Salamanca; Jean Buri-
dan, Bernardino of Siena, Juan Fenario, Peter Crockaert, Juan de Celaya
and Tomás de Vío all deserve special mention.

of salamanca
2.2. The Salamanca School of Economics

The scholastic approach was focused on “should be”, not on “be”12. This
is logical if one takes into account that it was implemented by theologians
whose main role was to advise confessors. Therefore, they were not econ-
omists but moralists13 interested in whether the actions of individuals were
permissible or not. Although the goal was common to all, we cannot
expect a uniform doctrine; on the contrary, over time they added new
points of view creating different streams of thought that struggled for
supremacy. An example of this struggle is to be found in the confrontation
between Thomism and Nominalism. In the sixteenth century in Spain the
former dominated in the University of Salamanca, as we will see later,
while the latter held sway in Alcalá de Henares. Precisely in that century,
at the height of late scholasticism, Spain became the centre of the scholas-
tic thought14. There are other streams of thought, as we have seen, that do
not belong to Salamanca; therefore, we should not make the mistake of
completely identifying Spanish late scholastics with the School of Sala-
manca15, because the latter is only part of the former.
Focusing on the School of Salamanca, Marjorie Grice-Hutchinson
notes that its modern discoverer is Wilhelm Endemann. However, she
stresses that was Jose Larraz who made it known to a wider audience16.
For his part, Pedro Schwartz states that Alberto Ullastres anticipated Lar-
raz17. In any case, more important than who rediscovered the School for
the modern world, is the controversy over the School. There seem to be
two doubts with respect to this. Did it really exist as such? And can we say
that it was a school of economics? With the first, there seems to be con-
sensus on a positive response, despite opinions such as those of Blaug, who
practically denied its existence18. But this view is a minority one, and today
it is considered that the beginning of the school can be traced to when
Francisco de Vitoria became established in Salamanca. The more contro-
versial point is the answer to the second question. Schwartz, Luciano
Pereña, and Francisco Gómez Camacho deny that it is a school of eco-
nomics. The first is more moderate in his statements, despite believing that
we should speak of a school of law, not economics, concludes in favour of
calling it Salamanca School of Economics19. For his part, Pereña denies

of salamanca
that the different disciplinary components of the School must be separat-

ed20. The views of Gómez Camacho run along the same critical lines. For
him, to ignore the philosophical environment in which they developed
their economic ideas is a mistake21. As a counterweight, the main defend-
er of the School of Salamanca is Grice-Hutchinson. In our opinion, also, it
is possible to think of it as a real school of economics. However, that asser-
tion must be qualified. The economic ideas of the scholastics of the School
of Salamanca should be analyzed by themselves, keeping in mind in what
context these ideas appeared, because if we ignored this we would commit
the error indicated by Pereña and Gómez Camacho. We can state that,
although there are some issues on which different members of the School
hold opposing views, there is a common substratum which acts as a cohe-
sive element. Therefore, to consider the School of Salamanca as a school
of economics, we must abandon a totally purist stance and adopt a less
rigid approach.
One important question to address, when we speak of a school22, is the
identification of its members. The School of Salamanca, as indicated by
Grice-Hutchinson23, has not yet been studied sufficiently to establish its
limits24. In the following lines we present a brief outline25 of the parts of
the School. To do this we will divide it into the following components: the
central figure, inner, middle and outer circles.
Regarding the central figure, studies agree that it was Francisco de Vito-
ria who, replacing the teaching of Peter Lombard by St. Thomas during his
professorship in Salamanca, founded the School26. The inner circle is
defined by the relationship forged between the central figure and his disci-
ples in the classroom. The first generation, which learned directly from the
central figure, is composed of Domingo de Soto, Martín de Azpilcueta,
Diego de Covarrubias, Melchor Cano, Juan Gil de la Nava, Diego de
Chaves, Vicente Barrón, Mancio de Corpus Christi and Martín de Ledes-
ma. This group did not keep to themselves what they learned but rather
they transferred it directly to, among others, Juan de Matienzo, Manuel de
Acosta, Arias Pinelo, Juan de Orozco, Antonio de Padilla, Francisco
Sarmiento de Mendoza, Diego Pérez de Salamanca, Bartolomé de Albor-
noz, Domingo Báñez, Pedro de Pravia, Tomás de Mercado, Bartolomé de

of salamanca
Medina, Juan de Ribera, Luis de León, Pedro de Sotomayor, Juan de la

Peña, Francisco Suárez, Leonard Lessius and Gregorio de Valencia. If we
study the names carefully, we can see that the influence of the School
reached Valencia and also America27 and the founding of the Jesuits has its
origin in this inner circle. Bartolomé de Albornoz was able to serve as a
link between Salamanca and Valencia. The same role was played by Juan
de Matienzo, Pedro de Pravia, Tomás de Mercado and, again, Bartolomé
de Albornoz in the American case. For their part, Francisco Suárez and
Leonard Lessius were Jesuits who were trained directly in Salamanca.
The members of the middle circle are related to Salamanca, they stud-
ied or they were professors there, but did not receive instruction directly
from the central figure or the members of the inner circle. This is the case
of Fernando Vázquez de Menchaca, Cristóbal de Villalón, Luis de Molina,
Juan de Lugo, Pedro de Aragón, Juan de Salas, Pedro de Valencia, Alonso
de Veracruz, Fernán Pérez de Oliva and Francisco Cervantes de Salazar.
Finally, the outer circle is composed of those who were influenced, at
least partially, by the ideas developed by the School, although they did not
receive their education from the central figure or his disciples and they did
not have a direct link with the University of Salamanca. In this category,
we can identify Juan de Medina, Bartolomé Carranza, Bartolomé de las
Casas, Luis de Alcalá, Luis Sarabia de la Calle, Pedro de Fonseca, Juan de
Mariana, Miguel Salón, Juan Blas Navarro, Cristóbal de Fonseca, Gabriel
del Toro, Francisco García, Pedro de Oñate, Domingo Muriel, Pedro de
Ortigosa, José de Herrera, Pedro de Arguto, Luis López, Domingo de San-
to Tomás, Esteban de Ávila, Juan Pérez Menacho, Miguel de Agia, Anto-
nio de Hervias, Sebastián de Santa María, Juan de Lorenzana, Juan
Ramírez, Juan Contreras, Domingo de Salazar and Andrés de Tordehu-
mos.
The previous classification should be understood, like the concept of a
School of Salamanca of Economics, abandoning the purist view and adopt-
ing a less rigid approach. With the outline of the components of the School
already established, the next step is to briefly note the main economic ideas
of the same. First we must point out that this description corresponds to
core economic principles, which does not exclude the possibility that some

of salamanca
members may disagree with the others. First, they consider the value of
goods to be subjective28, given by the utility29 they provide. They also devel-
oped a primitive quantitative theory of money30, stating that an increase in
the amount of money will lead to general increase in prices31. They defined
the functions of money, and related exchange rates to inflation in various
countries, outlining a theory of purchasing power parity. They seem to have
foreseen the theory of portfolio choice32. In addition, they distinguished
between legal price and natural price, in addition to establishing what was
the fair price33 (applicable to the two previous cases), and they established
legal cases for what was fair interest to be charged on loans and when the
exchange was acceptable, condemning all other cases34. They declared
themselves in favour of private property, if this did not contradict natural
law. Finally, they left interesting reflections on the tax system, but we will
deal with these in more detail later. However, as Schwartz shows, we can
attribute a certain anti-capitalist spirit to the School of Salamanca on issues
such as usury or property and public intervention35.
These ideas which were taken to other parts of the Iberian Peninsula
and America, and also spread to Italy, because of the influence of the
Jesuits in Rome, and Portugal, particularly through the University of
Coimbra. Later they reached the Protestant thinkers and, through them,
the Physiocrats and the Scottish liberals36, even reaching Adam Smith.
Moreover, his ideas passed, through Italy, to Menger, the influence of the
School of Salamanca on the Austrian School being recognized today37.
3. Comparative analysis of fiscal doctrine of the School

of Salamanca
In this section we hope to achieve two objectives. First, we put forward the
main ideas concerning taxes expressed by some prominent members of the
School of Salamanca. To do this, the authors we are going to analyze are
Francisco de Vitoria (1483-1546), Bartolomé de las Casas (1484-1566),
Martín de Azpilcueta (1492-1586), Domingo de Soto (1494-1570), Fer-
nando Vázquez de Menchaca (1512-1569), Diego de Covarrubias (1512-
1577), Juan Blas Navarro (1526-1595), Luis de Molina (1535-1600), Juan
de Mariana (1536-1624), Pedro de Aragón (1546-1592), Francisco Suárez

of salamanca
(1548-1617), Pedro de Valencia (1555-1620) and Juan de Lugo (1583-

1669). None of these thirteen authors made a specific study of the tax sys-
tem. As we shall see they had other objectives in dealing with taxes. How-
ever each of them made their contribution and together they left a coherent
and cohesive outline of a tax system38. The second, and more important,
of our goals is the comparison between the ideas on taxation of these
scholastics and modern taxation principles, taking care not to be anachro-
nistic. It is important to emphasize this aspect in order to avoid an unhis-
torical analysis. We must remember that the scholastics of the School of
Salamanca lived in the sixteenth and seventeenth centuries in a society with
very different institutions from today. One example is the contrast between
an absolutist, stratified and feudal society and a modern one governed by
democratic, parliamentarian and capitalist principles.
Before discussing the vision held by the scholastics on taxes, we will
make a brief statement of the comparative framework. Classical econom-
ic thought, whose main figure is Adam Smith39, established, throughout its
history, several requirements in order to qualify tax systems as “good”.
These were to enable sufficient collection, provide equity in the distribu-
tion of the burden, minimize the effect on market efficiency, promote sta-
bility and growth of the system, to be a fair and understandable system,
and present cost efficiency in tax administration40. The German contribu-
tion to the analysis of these principles, in the second half of the nineteenth
century, increased their number. Specifically, Adolph Wagner set out nine
principles: sufficiency, flexibility, choice of sources on which the tax is
applied, choice of kind of tax, generality, fairness, certainty, comfort and
cost efficiency41. Incorporating and expanding all previous contributions,
Fritz Neumark published his Grundsätze gerechter und ökonomisch
rationale Steuerpolitik in 1970. In this work, based on the most developed
countries in the nineteen-seventies, namely, the United States and much of
Western Europe, sets out which guidelines should govern a tax system. He
bases his principles on five basic criteria: justice, allocative efficiency, sta-
bility, economic development and the efficiency of tax collecting tech-
niques. To achieve these objectives a tax system should be developed from
the eighteen principles proposed by Neumark:

of salamanca
1. Budgetary and fiscal principles: Sufficiency; Adaptability.

2. Socio-political and ethical principles: Generality; Horizontal equity;
Ability to pay; Redistribution.
3. Political and economic principles: Avoidance of fiscal intervention-
ism; Minimum impact on the decisions of agents; Minimum impact
on market efficiency; Active flexibility, Passive flexibility; Promo-
tion of economic growth.
4. Legal and technical principles: Congruence and systematization;
Transparency; Feasibility; Continuity; Cost efficiency; Comfort.
The comparative framework we use for the tax ideas of the School of
Salamanca is that set out by Neumark, because since his work the litera-
ture has focused on discussion of the relative importance of the different
principles, but no alternative scheme has been proposed.
The members of the School of Salamanca did not have as a goal for
their observations the study of economics, or the Treasury in this particu-
lar case. But even with the purpose of giving advice to the faithful and con-
fessors on their behaviour, they made valuable contributions to the field in
question. As a prelude to the comparison between the taxation principles
of Neumark and the reflections of the School, we consider three basic and
interrelated ideas which will enable us to properly understand their tax
doctrine.
The first is the obligation in conscience to pay taxes. The general opin-
ion is that the individual is obliged in conscience to pay a tax if it is fair.
Vitoria said that not to satisfy the obligation is a mortal sin42. Blas Navar-
ro43 and Covarrubias44 are of the same opinion. The notion of obligation
in conscience, also shared by Soto, Azpilcueta, Molina, Valencia, Suárez45
and Lugo, is based on natural law as stated by Molina46 and Suárez47. The
fact that it is a moral obligation does not prevent the possibility of a sanc-
tion in the case of not fulfilling the obligation. This was noted by Covar-
rubias48 and Suárez49, who clarified that the penalty does not mean exemp-
tion from the obligation of payment. Knowing this, he who defrauds is
obliged to pay the defrauded50. However, if the tax were to be unfair, one
would not be obliged to pay it, as indicated by Azpilcueta51, Covarrubias52

of salamanca
and Suárez53. In this situation, payment should be returned54. The last pos-
sible case is that of doubt about the fairness of the tax. In this case no one
is obliged to pay, if the doubt is well founded, except in the case of doubts
concerning an increase in a former tax, in which case one would have to
pay what was usual, obviating the increase.
The second idea is the chain of reasoning that deals with life in society,
public power and property. On this point, there is less cohesion between
the components of the School, but there is no doubt that they start from
the same base. They believe that man is a social being, who shows a natu-
ral inclination to live in a community55. Also, they agree when they state
that every society needs a government to govern it56, with the objective of
the common good57. This power is given by the people58. However, on this
issue there are some differences of interpretation with Vitoria, Aragón,
Covarrubias and Suárez stating that the civil power comes from natural
law59, while Vázquez de Menchaca denies this60. Moreover, although all
recognize that society transfers the power61, but not the domain, there are
authors such as Mariana62, Vázquez de Menchaca63 or Aragón64 who con-
template the cessation of government by the people if it becomes a tyran-
ny. We also find different positions concerning the capacity of the civil
power to expropriate private property. They agree that the natural rights
of the individual mark the frontiers of the intervention of public power,
while again it is Mariana who most limits the authority of the monarch65.
However, most of them consider that the common good is a justification
for expropriation66.
The third and final idea focuses on the conditions that a tax must be
fair. There are four cases: that the tax is set by the authority with power to
do it (efficient cause), that its purpose is the common good (final or fair
cause), that it is general and proportional (formal cause), and that it
respects the exemptions of the nobility and clergy, when they are legiti-
mate, and of the poor, in any case. These four principles are universally
recognized by the School of Salamanca. However, some authors, a minor-
ity, also consider necessary the consent of the people67 and that people
should not be taxed indirectly on common staple goods and those for agri-
cultural use68. It seems to be agreed that the authority with power to estab-

of salamanca
lish taxes is the highest in the nation. This would depend on the type of
political regime operating in each territory. It is accepted that emperors,
kings, princes, popes, councils, free cities or ancient customs have this
authority69. In relation to the common good, this must be based on
defence, justice and the search for prosperity70. Finally, they recognize the
generality and proportionality71 of taxes to be fair. However, if the exemp-
tion of the clergy and nobility is fair, what should be added is that the
exemption of the poor, which is always fair, is not proportional if they are
forced to pay. But their exemption should never force others to pay more72.
Bearing in mind these three ideas, we can undertake the comparative
analysis between the tax ideas of the School of Salamanca and Neumark’s
modern taxation principles, avoiding an anachronistic approach. To do
this, we consider the principles that coincide with Neumark, wholly or
partially, in the same order that he listed them.
The first principle of the German economist, sufficiency, was already
recognized by members of the School of Salamanca as necessary for the
support of government73 and for society. For his part, Mariana74 comple-
mented and stated it, when he proposed a balanced budget, reducing gov-
ernment spending to a minimum for the fulfilment of public functions, and
imposing minimum taxes to cover these expenditures75.
With respect to the generality of the tax system, in principle they seem
to say that all must contribute to support the burden. Specifically, this is
true of Molina76, Valencia77 and Casas78. But we must not forget that they
then qualify this universality with several exemptions. The first affects the
poor, blind and elderly79. The second affects the clergy80, though this estate
is not completely freed from paying taxes as they were forced to pay
extraordinary taxes and for undertaking any commercial act81. The third
exemption was for the nobility82, who also had to pay for doing business.
It should be remembered that both the nobility and clergy were exempt if
they fulfilled their duties, that is to say, if they contributed to the defence
of the kingdom and to spiritual salvation, respectively. So, taking into
account all these exemptions, what at first was presented as a universal
contribution loses this characteristic, and thus cannot be considered to ful-
fil the principle of generality expressed by Neumark

of salamanca
The principle of ability to pay is described in the same sense as Neu-

mark by Blas Navarro83, Soto84, Molina and Suárez85. In general, all the
members of the School of Salamanca agree on this point, understanding
that distributive justice is lacking if the poor pay more than the rich, or
indeed the same as them. In line with this, they argue that indirect tax on
staples does not maintain proportionality, because it hurts the poor more
than the rich86, so they recommend that funds are not collected in this way.
The School’s position concerning the redistribution in the tax system is
clearly reflected in the writings of Aragón, Mariana and Valencia. The first
bases this principle on the idea that natural law forces the distribution of
wealth87. It was the Jesuit, Mariana who most developed the redistributive
power of the tax system. Specifically, he asked for lower taxes to be
charged on staples and, instead, for an increase of the fiscal burden on lux-
ury goods88. However, Neumark does not make reference to redistribution
through indirect taxation, virtually impossible to achieve, but rather
through rather direct taxes. So in this case the School of Salamanca does
not concord with the current sense of the principle. Finally, Valencia,
expounding on taxes on agricultural products, pointed out that it was not
a good idea to tax these, as this too hurts the poor most89.
The same Valencia, analyzing certain taxes, such as the previous one,
on wine and oil, or on flour90, seems to precede Neumark in seeking that
the taxes change production as little as possible, as they distort costs and
discourage supply. In practical terms, he is defending minimum interfer-
ence in those prices that make up the incentive structure, the basis of eco-
nomic relations in every human society. So we may consider the principles
of minimal impact on market efficiency and on the decision of agents to be
linked to each other.
The members of the School of Salamanca also coincide with the Ger-
man economist in believing that the tax system must promote economic
growth or, in his words, temporal prosperity. So, despite not using Keyne-
sian fiscal policy, they saw the complementarity between a fair tax system
and a certain degree of growth91.
Regarding the continuity as the system principle, theologians and jurists
of the School of Salamanca were in favour, if the circumstances that make

of salamanca
fair taxes do not change, the system should remain, stable. However, at the
moment that the cause that gives rise to a decrease or increase in taxation
arises, the system should respond in the same direction92. However, the
cause must be known93 and the reasons must be sufficient to maintain jus-
tice. Therefore, this guideline is quite similar to the principle of continuity,
but also relates to the adaptability and active flexibility principles.
Finally, in relation to cost efficiency94, collection was the subject of
much attention from the followers of Vitoria. They focused on the people
responsible for collection of taxes. This time, Mariana95 is the strictest. He
demands that we watch out for he who takes public revenues for his pri-
vate use and that the right to collect taxes should not be sold off to the rich
(because they will abuse their position even more), with the aim of not
increasing the burden on taxpayers.
It would be inappropriate to finish our analysis of the contributions of
the School of Salamanca to fiscal doctrine without showing that there are
other issues, of great importance, on which it left its mark and that for rea-
sons of space will be the focus of another paper. In particular, we should
emphasize the detailed analysis of certain taxes such as alcabalas96, mil-
lones or tithes, to mention some of the most relevant. They also studied
tariffs, a subject in which Mariana again stands out. This author, along
with Valencia and Covarrubias, defined and studied inflation as a tax not
voted on in the Parliament (Las Cortes) within the economic situation that
Spain was then living through at the beginning of the seventeenth century.
4. Conclusions
This article has studied the fiscal doctrine of the members of the School of
Salamanca comparing it with the modern fiscal principles proposed by
Neumark. The main contribution made is to identify and to explain the
similarities and differences between the two views, keeping in mind the dif-
ference of four centuries between them, in order to avoid anachronistic
mistakes.
The importance that tax systems have on the market and private agents
that operate in them, conditioning decisions such as investment or con-
sumption, makes this comparative historical study interesting, from both a

of salamanca
business and economic perspective. To shed light on the determining of fis-

cal doctrine and its evolution may assist in understanding the evolution
and development of markets and companies.
After the analysis shown in the previous section, we can state that at
least nine of the eighteen principles that a modern tax system must fulfil,
as set out by Neumark, were put forward during the sixteenth and early
seventeenth centuries by the theologians and jurists of the School of Sala-
manca. These principles are sufficiency, adaptability, ability to pay, mini-
mum impact on the decisions of agents, minimal impact on market effi-
ciency, active flexibility, promotion of economic growth, continuity and
cost efficiency. Those of generality and redistribution were mentioned but
when looked at in detail they seem to differ from the meaning of the term
used by the German economist. These scholastics were not concerned or,
either held a different view with respect to the other principles: horizontal
equity, avoidance of fiscal interventionism, passive flexibility, congruence
and systematization, transparency, feasibility and comfort. It is easy to see
that of the four groups of taxation principles proposed by Neumark, the
School of Salamanca paid attention to all but less so to the legal and tech-
nical principles. These are arguably those most related to more modern
societies, so it is reasonable to suppose that they would be the least con-
sidered four centuries ago.
These conclusions may lead us to a reflection on the validity of the
teachings of the scholastics. Their words are perhaps not as distant as we
might think if we go by the dates; maybe ideas on these issues have not
progressed much, although practice has done so, and today we are not as
advanced as we think. In any case, we have shown that many of the main
ingredients of modern tax systems, which determine the decisions taken by
individuals and companies in the markets, were already in the minds of
certain men in the sixteenth and seventeenth centuries, but not in the prac-
tice of the Treasuries of the time. The fiscal doctrine developed by the
School of Salamanca would have modernized the Treasury and possibly
encouraged the development of markets, if it had been implemented, but
the lack of political will meant that these ideas were never put into prac-
tice. We find here a good example of the difficulty of implementing tax

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principles, a problem that has been encountered throughout history, caus-

ing the history of Treasuries to move at a stately pace. However, to try to
dwell further on how their implementation might have affected the Span-
ish economy in the sixteenth century is closer to fiction than to the work
of economists, which does not stop us recognizing that, at least, one of the
seeds from which our current tax system has grown was sown in its time
by the School of Salamanca which, moreover, was a school of economics
in the full sense.
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Notes
(1) We are grateful to Francisco Comín Comín, Daniel Díaz Fuentes, Valentín Edo, Francisco Gómez Camacho, León
Gómez Rivas, Juan Hernández Andreu, José Jurado, María del Carmen Moreno Moreno, Victoriano Martín Martín,
Tomás Martínez Vara, José Luis Ramos Gorostiza, John Reeder, Nieves San Emeterio, Juan Zafra and participants in
XVI Encuentro de Economía Pública, where the paper “La cuestión fiscal en el pensamiento de la Escuela de Salamanca”
was presented, for having read and commented on earlier drafts of this paper. Responsibility for any error or weakness
in the text belongs, of course, to the authors.
(2) Always keeping in mind, to avoid being anachronistic, that in the sixteenth century one cannot speak of states, treasuries
and tax systems as in the twentieth century. This does not alter the fact that elements of both are comparable. The works
of Bilbao (1990), Carande (1987), Domínguez Ortiz (1983 and 1999), García Sanz (1991 and 1999), Garzón (1984),
Pulido (1996), Sureda (1999), Ulloa (1986) and Yun (2004) are especially useful for a better understanding of the historical
context that accompanied the School of Salamanca.
(3) Grice-Hutchinson (1982) and Sierra Bravo (1975), pp. 47-56.
(4) Also thanks to the Toledo School of Translators.
(5) Grice-Hutchinson (2005), p. 105. See also Orozco (2008).
(6) Gómez Camacho (1998), p. 155.
(7) Gómez Camacho (1998), p. 143.
(8) Grice-Hutchinson (2005), p. 107.
(9) Larraz (1943), p. 110.
(10) This presents marked differences with respect to nominalism (in this line of thought we can include Duns Scotus
and William of Ockham). In particular, in economics, Thomism is much more restrictive than nominalism.
(11) Grice-Hutchinson (2005), pp. 105-106.
(12) This does not mean that they forgot the “be“: we should clarify that they analyzed real phenomena around them,
to pronounce their moral view of the various issues discussed.
(13) Barrientos (1998), p. 94.
(14) Rothbard (1999), p. 132.
(15) We should not believe that all reflections on economics that were made in Spain at that time were work of the
scholastics. The arbitristas sought to solve the economic problems affecting the country, among which we can emphasize
fiscal problems. The arbitristas differed from the scholastics in the form of focus on issues rather than on the issues.
Some of the most prominent among them are Lope de Deza, Pedro Fernández de Navarrete, Martín de González de
Cellorigo, Francisco Martínez de Mata, Sancho de Moncada, Luis Ortiz, Gaspar and Luis Valle de la Cerda. Interesting
references on these and other arbitristas can be found in Larraz (1943), Eheberg (1944), Iparraguirre (1963), Vilar
(1976), Beltrán and Calle (1978), Abellán (1979), Grice-Hutchinson (1982), Garzón, M. (1984), Baeck, L. (1988), Beltrán,
L. (1993), Perdices de Blas, L. (1996), Perdices de Blas and Reeder (1998), Fuentes Quintana (1999), Perdices de
Blas and Reeder (2003) and Perdices de Blas and Sánchez Molledo (2007).
(16) Grice-Hutchinson (1995), pp. 15-16, and Gómez Rivas (2001), p. 26.
(17) Schwartz (2003), p. 24.
(18) Blaug (1985), pp. 57-59, and Estapé (1996), p. 451.

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(19) Schwartz (2003), p. 67.

(20) Pereña (1998), p. 62.
(21) Gómez Camacho (1998), p. 11.
(22) Schumpeter (1971), p. 529, when he defines a school of thought emphasizes the following features: “(it) had a
central figure, a doctrine and personal coherence, had a nucleus and areas of influence, and other marginals“. He also
considers several authors of the School of Salamanca as Azpilcueta, Lugo, Medina, Mercado, Molina and Soto, Schumpeter
(1971), pp. 133-145.
(23) Grice-Hutchinson (1995), pp. 21-22.
(24) Belda Plans (2000), pp. 162-182, performed an extensive explanation about the members of the School of Salamanca,
but his work does not focus on the economics of it, that’s what we try to explain in this article, but is focused from
theology.
(25) Schwartz (2003), Perdices de Blas and Reeder (2003), Larraz (1943), Grice-Hutchinson (2005), Grice-
Hutchinson (1995), Grice-Hutchinson (1982), Gómez Camacho (1998), VVAA (1998), Pereña (1954), Popescu (1997),
Popescu (1992), Vigo (1997) and Abellán (1979).
(26) Barrientos (1985), pp. 24-28.
(27) Popescu (1992) and (1997).
(28) Nowadays there is an unresolved controversy on this issue. The authors closer to the Austrian School state that
members of the School of Salamanca adopted the subjective theory of value, while other economists argue the opposite.
The difficulty of solving this debate lies in the fact that members of the School of Salamanca did not hold the same
ideas in all respects. So, correspondingly, we can find authors who defend several different points of view.
(29) In no case is explicit reference made to marginal utility.
(30) Previous to Jean Bodin, Baeck (1988), p. 383.
(31) The arrival of large quantities of precious metals from America and its effect on prices in Spain was the key behind
this vision.
(32) Gómez Camacho (1998), p. 254.
(33) Roover (1955), pp. 168-169.
(34) Pribram (1986), p. 30.
(35) Schwartz (2003), pp. 34-42.
(36) Gómez Rivas (2004).
(37) This is the position taken by Huerta de Soto (2000), pp. 52-60, among others. However, it is possible that the
link between the two schools is not as clear as proposed by this author.
(38) Coherent with the absolutist monarchical regime and the stratified society in which they lived and cohesive among
members of the School of Salamanca.
(39) The four canons of taxation according to Smith are cost efficiency, certainty, comfort and fairness, Smith (2005),
pp. 746-748.
(40) Musgrave and Musgrave (1994), pp. 261-262, and Buchanan (1968), pp. 207-219.
(41) Valle (2001), p. 46.
(42) Higuera (1963), p. 12, in Vitoria’s words: “the contribution of taxes that are necessary to defend the republic and
other public functions... if anyone does not pay that tribute they would be committing a mortal sin”.
(43) Peset (1984), p. 141.

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(44) Covarrubias (1957), p. 5.

(45) Suárez (1967), pp. 525-526.
(46) Higuera (1963), p. 28.
(47) Suárez (1967), p. 544, “tax is an obligation of justice, an obligation not based on a new and generous donation
but in natural law, by which those who work are obliged to give and those who govern receive their pay to help bear
the burdens of their position”.
(48) Covarrubias (1957), pp. 10-11, “human law, although it is civil law, may oblige the offender under mortal sin while
condemning him to a penalty, so that the offender be subject both to guilt and punishment, because the penalty does
not counter the guilt and there is no antagonism between the two”.
(49) Suárez (1967), p. 527.
(50) Azpilcueta (1554), p. 182, and Covarrubias (1957), p. 17.
(51) Azpilcueta (1554), p. 182 and 390.
(52) Covarrubias (1957), pp. 22-23, “if taxes are unfair, or their imposition comes from someone who is not entitled
to, or they are imposed by the prince beyond what is necessary for the demands of government, there is no obligation
in conscience of pay them and it will be possible not to pay without guilt”.
(53) Suárez (1967), p. 548.
(54) Suárez (1967), p. 548, “Princes, that issue such laws and receive such tributes, and government employees, that
charge them aware of the injustice, commit a grave sin and are obliged to repay them.”
(55) According to Martín (2002), pp. 88-89 and 112-114, this was the position of Vitoria and Vázquez de Menchaca.
Mariana (1981) devotes the first chapter to developing this idea. Also Suarez (1967), p. 198, support it stating that
“man is a social animal in a natural and straight way and tends to live in community.”
(56) Covarrubias (1957), p. 251, argues that “in every civil society a governor is necessary to take care of it and keep
all citizens fulfilling their duties”.
(57) Casas (1984), p. 37, Suárez (1967), pp. 39-40, and Vázquez de Menchaca (1931), p I: 69 and 71.
(58) Martín (2002), pp. 91 and 116-117, Barrientos (1978), pp. 266-268, Soto (1967), p. 13 and Covarrubias (1957),
p. 251.
(59) Martín (2002), p. 115, Fernández (1986), p. 123, Barrientos (1978), pp. 266-268, and Covarrubias (1957), p. 273.
Suárez (1967), p. 197, believes that “the civil magistracy endowed with temporal power to rule over men is just and
in conformity with human nature”.
(60) Vázquez de Menchaca (1931), p. I: 71, “the monarchy is acknowledged as origin the law of nations, in order to
avoid injustice, theft, violence, assaults, deaths, sedition and battles, fruits of the disastrous wars”.
(61) Martín (2002), p. 118 and Suárez (1967), p. 202.
(62) Mariana (1981).
(63) San Emeterio (2005), p. 104.
(64) Barrientos (1978), p. 270.
(65) Limits found in Mariana (1987), p. 31, 36 and 40, “the king is not owner of the goods of each” “if the king is not
the owner of particular goods, he cannot take all or part of them but by the will of their owners” and “the prince is not
owner, but manager of the particular goods”. Mariana (1981), p. 77, argues that “ new taxes can only be established
and laws enacted with the will of the people”.
(66) Barrientos (1978), p. 270. Meanwhile, Vázquez de Menchaca (1931), p. I: 166, add the payment of compensation
to the common good, to approve the expropriation.

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(67) Mariana (1987), p. 36, “according to law and justice this should be done, namely to receive the approval of the
people to impose new taxes in the kingdom”. Contrary to the view of Mariana, Suárez (1967), p. 543, believes that
“the consent of the kingdom is not necessary for the taxes”.
(68) Blas Navarro in Peset (1984), p. 140.
(69) Higuera (1963), pp. 38-39, and Peset (1984), p. 140. The School of Salamanca says nothing about the Courts
which played a key role in tax issues, Fortea (1990a and 1990b).
(70) This statement is similar to that made by Smith in The Wealth of Nations, when he determines that public sector
functions are to ensure defence and justice and important public building works which are not assumed by private initiative.
But it is not surprising that the School of Salamanca and the Scottish economist agree on this and other matters. In
the doctoral thesis of Gómez Rivas (2004) and Gómez Rivas (2005) we find details of the ways by which the ideas of
the School of Salamanca reached Smith.
(71) Understood in a double sense. First, there must be proportion between income and public spending. Second,
proportionality in the burden on the population.
(72) Barrientos (1998), p. 119.
(73) Vázquez de Menchaca (1931), p. III: 22, “if the prince was not sufficiently equipped with proportionate income,
it certainly would be lawful to demand from citizens what lacks for his adequate support, for the high expenditure of
wars, for the fortification of cities, for the leaders’ wages and payments of the soldiers and for other such things”.
(74) Mariana (1981), pp. 332-333, “our main care should be, as we mentioned, what the levels of revenue and expenditure
are”.
(75) Mariana (1981), p. 64, “tries that taxes are only those necessary to preserve peace and support the war”.
(76) Gorosquieta (1972), p. 141.
(77) Valencia (1994), p. 132, “that the public burdens are distributed generally”.
(78) Casas (1984), p. 81.
(79) According to Lugo, Soto and Suárez (1967), p. 554.
(80) Suárez (1967), p. 543.
(81) Peset (1984), p. 143, and Gorosquieta (1972), pp. 142-143.
(82) Mariana (1981), pp. 337-338, and Soto (1967), pp. 275-277. There were two positions on inheritance of the exemption
of nobility within the School of Salamanca. On the one hand, Molina and Mariana defended its hereditary nature. The
others considered it a personal privilege which ended with the death of the carrier.
(83) Peset (1984), p. 140.
(84) Soto (1967), p. 276, “taxes must be imposed on wealth, possessions and businesses, not on people, that is: everyone
must pay more if they are richer and produce more earnings and not when they are in more need”.
(85) Suárez (1967), p. 539.
(86) Gorosquieta (1972), p. 147.
(87) Barrientos (1978), p. 240, “the authority or the judges, as custodians and administrators of justice, have the obligation
to compel the distribution of such goods, against the will of the rich who, by natural law, are obliged to distribute”.
(88) Mariana (1987), p. 94, and Mariana (1981), p. 336, “may impose reasonable taxes on staples such as wine,
wheat, meat, wool and linen clothes, when they are ordinary and not a luxury, and to replace the poor return of
these taxes, should be taxing articles of pure pleasure and luxury”. In Fernandez (2006) we find an overview of
this topic.

of salamanca
(89) Valencia (1994), p. 20. On the issue of taxation on agricultural products it could be asked whether scholastics
did not act as an interested party, given that they belonged to the clergy, a land owning group particularly affected by
this type of taxation.
(90) Valencia (1994), pp. 134-135.
(91) In Lessius’ words (1621), p. 41, collected by Gómez Camacho (1998), p. 300, and Gorosquieta (1972), p. 143,
“it is the right and duty of the prince to govern the people, give justice, distance enemies, and finally seek with all his
forces the peace and temporal prosperity”. Therefore, as the same Gorosquieta (1972) shows, p. 144 members of the
School of Salamanca “consider advisable government intervention through fiscal policy to maintain a healthy economy
and achieve economic prosperity”.
(92) Suárez (1967), p. 537, “the cause is necessary so the tax is fair, as said; then stopping it, justice stops, and consequently
the tribute must stop”.
(93) Suárez (1967), p. 535, “the second necessary condition for the tax being fair is the final reason or cause” as it
says in the Decretals. These also indicate that it is necessary that the cause is known”.
(94) The School of Salamanca maybe not study this principle in as much depth as Neumark, however the concern about
the cost in the collection of taxes was not unthought-of by them.
(95) Mariana (1981), pp. 64 and 332-334.
(96) Apart from the School of Salamanca, this was a tax studied by other Spanish economists. For example Uztáriz,
as quoted by it in The Wealth of Nations, Smith (2005), p. 776, “hence Uztáriz imputes to alcabala the ruin of the Spanish
industry”.

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11 91

Markets and taxation: modern

Key words: School of Salamanca, history of economic thought, Neumark,

JEL codes: B11, H20, N43.

Luis Perdices de Blas

january · april 2011 · esic market [91]

Electronic copy available at: http://ssrn.com/abstract=2172318

[92] january · april 2011 · esic market

Electronic copy available at: http://ssrn.com/abstract=2172318

2. A general overview of the School of Salamanca

january · april 2011 · esic market [93]

With regards to the Law, canonic or Roman, it is likely to have influ-

[94] january · april 2011 · esic market

2.2. The Salamanca School of Economics

january · april 2011 · esic market [95]

that the different disciplinary components of the School must be separat-

[96] january · april 2011 · esic market

Medina, Juan de Ribera, Luis de León, Pedro de Sotomayor, Juan de la

january · april 2011 · esic market [97]

3. Comparative analysis of fiscal doctrine of the School

[98] january · april 2011 · esic market

(1548-1617), Pedro de Valencia (1555-1620) and Juan de Lugo (1583-

january · april 2011 · esic market [99]

1. Budgetary and fiscal principles: Sufficiency; Adaptability.

[100] january · april 2011 · esic market

january · april 2011 · esic market [101]

[102] january · april 2011 · esic market

The principle of ability to pay is described in the same sense as Neu-

january · april 2011 · esic market [103]

[104] january · april 2011 · esic market

business and economic perspective. To shed light on the determining of fis-

january · april 2011 · esic market [105]

principles, a problem that has been encountered throughout history, caus-

[106] january · april 2011 · esic market

BUCHANAN, J.M. (1968). Hacienda Pública. Editorial de Derecho

january · april 2011 · esic market [107]

GARCÍA SANZ, A. (1991). “Repercusiones de la fiscalidad sobre la eco-

[108] january · april 2011 · esic market

HIGUERA, G. (1963). “Impuestos y moral en los siglos XVI y XVII”, Mis-

january · april 2011 · esic market [109]

Estudios Turolenses, Gobierno de Aragón, Institución Fernando el

[110] january · april 2011 · esic market

SMITH, A. (2005) [1776]. La riqueza de las naciones. Edited by Carlos

january · april 2011 · esic market [111]

[112] january · april 2011 · esic market

(19) Schwartz (2003), p. 67.

january · april 2011 · esic market [113]

(44) Covarrubias (1957), p. 5.

[114] january · april 2011 · esic market

january · april 2011 · esic market [115]

[116] january · april 2011 · esic market

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