TAX, TAXATION. 



TAXATION. 



reventte may be expected. Sugar ii an article of this description. It 

 ha* become nececmry of life aa well a* a favourite luxury. There 

 are scarcely any limit* to the supply that could be raised, and the 

 present dutiei add materially to the price and check consumption. As 

 a proof of the suddennea* with which the consumption of foreign 

 sugar might be expected to increase if the exceuiro duty were reduced, 

 we may refer to the effect* of equalising the duties on East and West 

 India sugars in 1836. In that year the duty on East India sugar wa> 

 reduced from 32*. the cwt to 24j. In 1835 the quantity imported 

 had been 147,976 owls. ; and in 1837, one year only after the change, 

 the import had increased to 802,945 cwta. ; in 1838, to 474,100 cwU. ; 

 and in 1839, to 587,142 cwta. As the tax was diminished only by one- 

 fourth, and the consumption was immediately more than doubled, the 

 revenue at once gained considerably by the reduction of duty. The 

 duty now varies from 18*. 4d. to 12. 6d. per cwt., according to the 

 quality, and the importation in 1859 was 7,426,791 owts. ; the quantity 

 retained for home consumption was 8,847,119, on which the duty was 

 7,291,OS9/.. ami the estimated value 12,516,757'. 



A financial experiment will serve to show how little an increased 

 revenue can be depended upon as the result of an augmentation of 

 taxes upon articles of consumption. In 1S40 an addition of 5 per cent, 

 was made to all the duties of diatoms and excise, and a proportionate 

 increase of revenue was anticipated, but not realised. The net pro- 

 duce of the customs and excise in the year ending January 5th, 1840, 

 amounted to 37,911,506'. The estimated produce for the year ending 

 January 5th, 1842, was 39.807.08U, 1,895,575/. being expected from 

 the additional 5 per cent. The actual increase, however, was only 

 206.715A, or little more than 4 per cent, instead of the 5 per cent, 

 which had been expected. This result was undoubtedly in part caused 

 by a general stagnation of trade, and by the consequent distress which 

 prevailed in that year ; but we notice it because the principle of an 

 indiscriminate augmentation of existing taxes, without reference to 

 their present amount, character, and circumstances, is very unwise. 



We have said that experience alone can show the precise rate of a 

 particular tax which will not affect consumption and will at the same 

 time discourage smuggling. It must be presumed that existing rates 

 have been fixed in order to secure these results, and that they are j ustified 

 by experience. To add to them, therefore, not because they are in- 

 sufficient for their immediate object, but because a general addition 

 to the revenue is needed, is to neglect experience and to disturb the 

 proper relations between the amount of tax and the value of particular 

 articles. During the lost century it was a common financial course to add 

 a general per centage of increase upon all the customs' duties whenever 

 the revenue was found to be insufficient for immediate purposes. To 

 this unwise policy must be attributed many of the strange anomalies 

 which formerly existed in the British tariff. Any recurrence to so 

 clumsy a mode of taxation should be avoided. The tax upon each 

 article ought to be adjusted by itself upon sound principles, and then 

 should not be changed merely to save the trouble or to avoid the un- 

 popularity of selecting particular articles for increased taxation or of 

 inventing new burdens. 



Protective, Ditcriminatiny, and Prohibitory Dutia. The legitimate 

 object of taxation is that of obtaining a revenue in the least injurious 

 manner for the benefit of the community ; but this object has con- 

 stantly been overlooked for the sake of ends not fairly to be accom- 

 plished by taxation. Legislature should endeavour to encourage 

 agriculture, trade, and manufactures; and it would be culpable to 

 neglect any proper means of encouragement, which are not only 

 beneficial to particular interests, but add to the general prosperity. 

 Unfortunately, however, the zeal of most legislatures upon this point 

 has been misdirected. They have seized upon taxation as the instru- 

 ment of protection and encouragement ; and, using it as such, have 

 injured the great mass of their own countrymen, and ultimately have 

 failed in promoting the very interests they had intended to serve. When 

 the system of protection has existed, severe injuries and even injustice 

 are inflicted whenever an attempt is made to undo the mischief which 

 baa been dona Reason and experience unite in teaching the impolicy 

 of protective taxes ; and, in our own country, this impolicy was 

 acknowledged by the acts of 1846, which regulate the trade in grain, 

 meal, and flour, and other articles. 



The object of a protective duty is to raise artificially the price of the 

 produce or manufactures of one country aa compared with the produce 

 or manufactures of another. A heavy tax easily effects this object, 

 and thus prevents competition on the part of that country whose 

 commodities are taxed, and establishes a monopoly in the supply of 

 those commodities in favour of the parties for whose benefit the tax 

 was imposed. The revenue, the avowed object of a tax, so for from 

 being improved, is here actually sacrificed by the exclusion of merchan- 

 dise, which at moderate duties would fill the coffers of the state. The 

 (tote clearly is a loser ; the foreigner, whose goods are denied a market, 

 is a loser. Who then gains by these losses t Not the consumer ; for 

 the more abundant the supply, the better and cheaper will In- iin<l 

 the market ; but the seller, who is enabled to obtain a high | 

 his wares because he has a monopoly in the sale of them, is the only 

 party who gains. The community at large suffer doubly : first, by 

 having to buy dear instead of cheap goods, or by being denied the 

 iweof them altogether; and, secondly, by Wing obliged to pay other 

 Uxe which would not have been required if the very articles which 



would have made their purchases cheaper had been charged with a 

 moderate import. Even the sellers, for whom all these sacrifices are 

 made, do not derive the benefit which might be expected. In the 

 [nods which they sell themselves, indeed, they are gainers; but in 

 mrchaaing of other monopolist* they lose by an artificially high price, 

 ike the rest of the community. It constantly happens too, that 

 although the prices at which they sell are high, their profits are re- 

 luoed, by the competition of others selling the same articles, to the 

 general level of profits throughout the country. When this is the 

 ase, all parties, without exception, are losers the state, the commu- 

 nity, and the monopolist*. 



Protection may be accomplished by actual prohibition of the import 

 of particular articles, by exorbitant duties which amount t-> pn.hibi- 

 ion, or by such duties only as give the home producer an advantage, 

 duties may also discriminate between the produce of different coun- 

 iries, and give the preference to some, to the injury and exclusion of 

 others. In this country all these modes of protection have been 

 resorted to : but their impolicy hat been recognised by the legislature, 

 which, within the last few years, has advanced rapidly in the adopt:. .11 

 of a more sound system of taxation. [TARIFF.] 



Duties are called discriminating or differential when they are not 

 levied equally upon the produce or manufactures of different countries. 

 The object of them is to give an advantage to the country on whose 

 commodities the tax is lightest, as compared with others. To obtain 

 such a preference has been the object of various negotiations and com- 

 mercial treaties between different states, as it opens extensive market* 

 > the industry of the favoured nation. By the commercial policy of 

 England the principle of discrimination may be said to have been 

 confined to the protection of our colonies against the competition of 

 foreign countries. As regards each other, all foreign countries enjoy 

 equal commercial advantages in their intercourse with England. It 

 109 been contended that colonies form on integral part of the mother- 

 country, and that the commercial intercourse between the several part* 

 of the British empire ought to be viewed as a vast coasting-trade, but 

 now foreign vessels are admitted to this trade in England, although 

 Foreign nations refuse to adopt the like practice. If this principle were 

 acted upon, it would certainly present a grand fiscal union worthy of 

 admiration. There were two great articles of consumption, sugar and 

 timber, upon which the discriminating duties have been most mis- 

 chievous iu their results. These discriminating duties have been 

 abolished. Those on sugar have been noticed. Those on timber were 

 reduced iu 1847 and 1848, and in 1800 the difference between foreign 

 and colonial timber was abolished, and Is. per load only is imposed 

 on all. 



Export Dutiei. Duties levied upon goods exported to foreign 

 countries are ultimately paid by the foreign consumer, and thus have 

 the effect of making the subject of one state bear the burdens of 

 another. However desirable this may appear to the state, whose 

 treasury is enriched at the expense of foreigners, the expediency of 

 such duties will depend upon peculiar circumstances, and great nicety 

 i.i required in the regulation of them. If a country possesses within 

 itself some produce or manufacture much in request abroad, and for 

 the production of which it has peculiar advantages, a modfi.il < export 

 duty may be MTV desirable. In this manner Kussia, which almost 

 alone supplies tallow to the rest of Europe, derives a considerable 

 revenue from an export duty upon that article. Upon the same 

 principle a duty upon machinery exported from Great Britain would 

 have been politic. British machinists far excelled all others in skill 

 and ingenuity, and foreign manufacturers were willing to pay almost 

 any price for their machinery. Notwithstanding the prohibition, 

 large quantities were smuggled abroad at on enormous cost, but the 

 difficulty and expense of evasion were so great that foreigners had 

 latterly almost confined their purchases, in this country, to models and 

 drawings, and made the machinery themselves, with the assistance of 

 British artisans, whom they enticed abroad by extravagant wages. 

 The partial relaxation of the prohibitory law in 1825, by granting 

 licences to export certain kinds of machinery, showed the extent to 

 which the trade might have been carried under a more liberal policy. 

 The official value of machinery exported under licence in 18 In was 

 593,0642., in addition to various tools allowed by law to be exported, of 

 which no account was taken. The restriction is now removed, and the 

 declared value in 1859 amounted to 2,52,1:! '. 



Though moderate export duties upon articles of which a country 

 ha* almost the exclusive supply may be advisable, heavy duties will 

 check the demand abroad iu the same manner as they affect the con- 

 sumption of commodities at home. In the same manner also they are 

 injurious to trade and unprofitable to the revenue. 



All duties, whatever, should be avoided upon the export of produce 

 or manufactures which may be also sent from other countries to the 

 same markets. They would discourage trade and offer a premium to 

 foreign competition. 



Although the temptation is great to shift taxes from one country to 

 niK'tli'T by meaim of export duties, this temptation is equally great in 

 all countries ; and if their several governments should be actuated by 

 the desire to make foreigners contribute to their revenue, their oppor- 

 tunities for carrying out such a system would probably be equal, and 

 thus retaliations might bo made upon each other, which, after all, 

 would neutralise their efforts to tax foreigners, and leave them in the 



