Esham

Definition of "Esham"

Lit: shares. Tech: The system of tax-farming adopted by the Ottomans after 1775. In the early stages, the tax-farming system allowed the tax-farmer to collect taxes from the peasant and deposit the amount, after deducting his share as a reward for tax-collection services. Thus the tax farmer had an incentive to work for the state. The state did not need to create a present day system of tax department for collecting the land tax. Gradually, the system evolved into a corporate body whereby the system of tax-farm was managed centrally and its annual expected net profit was divided into shares, hence the term esham. Under the system, if a tax-farm was expected to generate a net profit of 15000 grus, this profit could be divided into a number of shares, say, 100 shares of 150 grus each. The sale price of each share (sahm) usually consisted of five times the expected annual profit. In the above example, if the annual expected profit of a share was 150 grus, the price of the share would be 750 grus. Any person who paid this amount could buy a share. He was then entitled to receive the profit for his share for rest of his life. If he lived longer than 5 years, he would make a profit, but if he died earlier, the state could re-sell his share to someone else for a different price. Small savers could invest in the scheme. The system worked efficiently for some time. Once the number of shareholders increased, the state could not monitor the shareholders properly. Ultimately, people started transferring the shares without state authority.