TAX 



115 



TAX 



Quantities cleared 



for Consumption. Net Revenue. 



1826 . 13,203,323 Ibs. 336,570 



1827 . 15,566,376 399,960 



1828 . 17,127,633 440,245 



But the consumption has since been rapidly increasing, 

 and in the last two years the consumption and revenue 



thus appear : 



Quantities cleared 

 for Consumption. 



28,708,033 Ibs. 



28,420.980 



Net Revenue. 



1840 . 28,708,033 Ibs. 921,550 



1841 . 28,420,980 887,721 



The slight tailing off in the last year may be accounte 

 for by the general depression of trade, and perhaps in som 

 measure also by the addition of 5 per cent, to the custom 

 duties, which was then in operation. 



In 1835 coffee, the produce of British possessions ir 

 India, was admitted at the same duty as plantation coffee 

 viz. 6t/. per lb., and the effect of the reduction, in encou 

 raging the growth of the plant in India and the consump 

 tion of the berry in this country, has already been verj 

 great, and perhaps the coffee trade of the East may as ye" 

 be considered in its infancy. In 1834, the year before the 

 reduction, 8,875,961 Ibs. were imported from the Eas 

 India Company's territories and Ceylon ; and in 1840 

 16,885,698 Ibs., or nearly double. The new customs tariff 

 effects a further reduction of duty. That on foreign coffee 

 is lor the future to be Sd. a lb., and on coffee the pro- 

 duce of British possessions only 4d. An increased con- 

 sumption will doubtless be the effect of this measure, anc 

 ultimately the revenue will be improved. 



Thus reductions of existing duties are proved by these 

 examples to increase the revenue ; but whether the effecl 

 of them be immediate or deferred must depend upon a 

 variety of circumstances. If the reduction puts an end to 

 extensive smuggling, the revenue will derive immediate 

 benefit, as both the demand and the supply of the article 

 already exist, and the reduced tax, without affecting pro- 

 duction or consumption, acts as a police regulation, and 

 at once protects the revenue from fraud. But where there 

 is little or no smuggling, and the revenue can only be in- 

 creased by means of ndditional consumption, the effect of 

 reduced duties may be deferred and even remote. The 

 article may have to be produced ; capital, skill, labour, and 

 time may be required to provide it in sufficient quantities 

 to meet the growing d"mands of the consumer; and even 

 should the supply become abundant, the habits and tastes 

 of a people cannot be changed on a sudden. The high 

 price of an article may have placed it out of their reach, 

 and in the meanwhile they may have become attached to 

 a favourite substitute, or may be slow to spend their money 

 upon a commodity which they have learned to do without. 

 These and other causes may defer for a considerable time 

 such an increase of consumption as would make up for the 

 reduced rate of tax, especially when the reduction has 

 been so great as to require an extraordinary addition to the 

 previous amount of consumption, before the sacrifice made 

 in the revenue can be redeemed. But where, the article 

 on which it is proposed to reduce a tax is already in uni- 

 and the supply immediate and abundant, 

 and where the tax is so heavy as to restrain consumption, 

 no present loss need be apprehended from a remission of 

 part of the tax, and a very >ptly increase of revenue may 

 b,' expected. Sugar is an article of this description. It 

 has become a necessary of life as well as a favourite 

 luxury. There are scarcely any limits to the supply that 

 could oe raised, and the present duties add materially to 

 the price and check consumption. As a proof of the sud- 

 denness with which the consumption of foreign sugar 

 might be expected to increase if the excessive duty were 

 ed, we may refer to the effects of equalizing the 

 duties on East and West India sugars in 1830. In that 

 the duty on East India sugar was reduced from 3liv. 

 .vt. to 24*. In 1H35 the quantity imported had been 

 Id rvvU. ; and in 1837, one year only after the change, 

 the import had increased to 302,945 cwts. ; in 1838, to 

 474.10(1 eats. : and in 1838, to 587,142 rwls. As the tax 

 iiiMni-hed only by one-fourth, and the consumption 

 i.mnediati-ly more than doubled, the revenue at once 



ably by the reduction of duty. 



A recent financial experiment, will serve to show how 

 little ed leveime can be depended upon as the 



re.Mi.' .tation of taxes upon articles ol 



sumption. In 1840 an addition of 5 per cent, was . 



to all the duties of customs and excise, and a proportionate 

 increase of revenue was anticipated, but not realized The 

 net produce of the customs and excise in the year endin- 

 January 5th, 1840, amounted to 37,91 1.506/. The estf 

 mated produce for the year ending January 5th 184^ wn 

 39,807,08U., 1,895,575*. being elpected from' the add? 

 tional o per cent. The actual increase however was only 

 306,715;., or little more than one-half per cent., instead of 

 J 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 in- 

 discriminate augmentation of existing taxes, without refer- 

 ence 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 justified by experience, To add to them therefore, not 

 because they are insufficient for their immediate object, 

 but because a general addition to the revenue is needed, 

 is to neglect experience and to disturb the proper rela- 

 tions between the amount of tax and the value of parti- 

 cular articles. During the last century it was a common 

 financial course to add a general per cenlage 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 up to this time have existed in the British 

 tariff. Any recurrence to so unscientific a mode of taxa- 

 tion 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 unpopularity of selecting particular articles for in- 

 creased taxation or of inventing new burthens. 



Protective, Discriminating, and Prohibitory Duties. 

 The legitimate object of taxation is that of obtaining a 

 revenue in the least injurious manner for the benefit of 

 he community; but this object has constantly been over- 

 looked for the sake of ends not fairly to be accomplished 

 )y taxation. It is natural for a legislature to endeavour 

 jy every means in its power to encourage agriculture, 

 rade, 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 

 nost legislatures upon this point has been misdirected. 

 They have seized upon taxation as the instrument of pro 

 ection and encouragement ; and, using it as such, have 

 njured the great mass of their own countrymen, and ulti- 

 nately have failed in promoting the very interests they 

 lad intended to serve. All that we can hope in this and 

 ither European countries is a gradual adoption of sound 

 )rinciples, and the correction, at some distant period, of 

 he mistakes which have been acted upon for centuries ; 

 iut it is to be hoped that in the new countries of the 

 vorld, where systems of revenue are not yet established, 

 r are growing up with the progress of society, none of 

 lie errors of the Old World will be suffered to have a 

 eginning. If once the system of protection has existed, 

 evere injuries and even injustice are inflicted whenever 

 n attempt is made to undo the mischief which has been 

 one. Reason and experience unite in teaching the im- 

 olicy of protective taxes ; and, in our own country, it is 

 ow so generally acknowledged, that nothing but the ex- 

 emci difficulty of withdrawing the protection which has 

 een given obstructs legislation upon sound principles. 

 The object of a protective duty is to raise artificially 

 the price of the produce or manufactures of one country 

 as 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 tin- 

 tax was improved. The revenue, the avowed object of a 

 tax, so far from being improved, is here actually sacrificed 

 by the exclusion of merchandise, which at moderate duties 

 would fill the coffers of the state. The state clearly is a 

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

 a loser. Who then gains by these losses ? Not the con- 

 sumer ; for the more abundant the supply, the better and 



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