The Simplified Wealth of Nations of Adam Smith, Book 5, Chap. 2, Article 4: General Taxes -- Taxes on Luxuries

Chapter 2o, Article 4: General Taxes -- Taxes on luxuries

Taxes on Luxury Commodities

205 Taxes on luxuries generally are paid piecemeal.   206 Such taxes always take out or keep out from the people's pockets more than almost any other taxes in four different ways:
  1. 207 Their levying requires many custom-house and excise officers.
    • Their salaries and perks are a real tax on the people.
    • This cost is more moderate in Great Britain than in most other countries.
    • In the year ending July 5, 1775, the gross produce of the excise duties in England was £5,507,308l. 18s. 8¼d.
      • It was levied at a cost of little more than 5.5%.
    • From this gross produce, the bounties and drawbacks paid on the exportation of excisable goods must be deducted.
      • This reduces the net produce below £5 million.
    • The levying of the excise duty on salt, which is under a different management, is much more expensive.
    • The net customs revenue does not amount to £2.5 million.
      • It is levied at a cost of more than 10% in the officers' salaries and other incidents.
    • But the perks of custom-house officers are everywhere much greater than their salaries.
      • At some ports, these are more than double or triple those salaries.
    • If the officers' salaries and other incidents amount to more than 10% on the net customs revenue, the total cost of levying that revenue may amount, in salaries and perks, to more than 20% or 30%.
    • The excise officers receive few or no perks.
      • The administration of excise is a more recent establishment.
      • In general, it is  less corrupted than that of the customs.
      • The length of time has introduced and authorized many abuses.
    • By charging on malt the whole revenue presently levied by duties on malt and malt liquors, more than £50,000 can be saved from the annual cost of the excise.
    • A much bigger savings can be made by:
      • confining the customs duties to a few kinds of goods
      • levying those duties according to the excise laws
    • The net produce of that year, after deducting all expences and allowances, was £4,975,652l. 19s. 6d.
  1. 208 2-Taxes on luxury commodities obstruct or discourage certain industries because they discourage consumption.
  1. 209 3 - Smuggling frequently causes forfeitures and other penalties which entirely ruin the smuggler.
  1. 210 4 - Such taxes expose dealers to oppression, trouble and vexation through the odious examination of the tax-gatherers.
    • Vexation is certainly an expence which every man wants to be free of.
    • Excise laws are more effective for taxation than customs, but causes more vexations.
    • When a merchant has paid the customs duties for his imported goods, he is not liable to any further trouble from the custom-house officer.
      • But dealers have no respite from the continual examinations of the excise officers.
    • Thus, excise duties and excise officers are more unpopular than customs duties and custom-house officers.
      • Those excise officers develop a hardness of character which custom-house officers frequently do not have.
      • This observation might be a mere suggestion of smugglers who are prevented by their diligence.
211 The inconveniences from taxes on consumable commodities fall as light on the British as on those of other countries with expensive governments. 212 Because of the notion that duties on consumable goods were taxes on merchants' profits, those duties were repeated on every successive sale of goods in some countries. 213 In Naples, there is a similar tax of 3% on the value of all contracts, including contracts of sale. 214 The uniform system of taxation, with a few small exceptions, in all of the United Kingdom, leaves its interior commerce almost entirely free.
Words: 3970 For corrections or comments, please email [email protected]   Original: In 1774, the cyder tax produced only 3083l. 6s. 8d, short of its usual amount.

Next: Chapter 2p: French Taxation