file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when the barrel was tapped it would destroy the stamp.
An excise, or excise tax, is any duty (economics), duty on manufactured goods (economics), goods that is levied at the moment of manufacture rather than at sale. Excises are often associated with
customs duties
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
, which are levied on pre-existing goods when they cross a designated border in a specific direction; customs are levied on goods that become taxable items at the ''border'', while excise is levied on goods that came into existence ''inland''.
An excise is considered an
indirect tax
An indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST), excise, consumption tax, tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the i ...
, meaning that the producer or seller who pays the levy to the government is expected to try to recover their loss by raising the price paid by the eventual buyer of the goods. Excises are typically imposed in addition to an indirect tax such as a
sales tax
A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a govern ...
or
value-added tax
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end ...
(VAT). Typically, an excise is distinguished from a sales tax or VAT in three ways:
# an excise is typically a
per unit tax, costing a specific amount for a volume or unit of the item purchased, whereas a sales tax or value-added tax is an
''ad valorem'' tax and proportional to the price of the goods,
# an excise typically applies to a narrow range of products, and
# an excise is typically heavier, accounting for a higher fraction of the retail price of the targeted products.
Typical examples of excise duties are taxes on
gasoline
Gasoline (; ) or petrol (; ) (see ) is a transparent, petroleum-derived flammable liquid that is used primarily as a fuel in most spark-ignited internal combustion engines (also known as petrol engines). It consists mostly of organic co ...
and other fuels and taxes on
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
and
alcohol
Alcohol most commonly refers to:
* Alcohol (chemistry), an organic compound in which a hydroxyl group is bound to a carbon atom
* Alcohol (drug), an intoxicant found in alcoholic drinks
Alcohol may also refer to:
Chemicals
* Ethanol, one of sev ...
(sometimes referred to as
sin tax
A sin tax is an excise tax specifically levied on certain goods deemed harmful to society and individuals, such as alcohol, tobacco, drugs, candies, soft drinks, fast foods, coffee, sugar, gambling, and pornography. In contrast to Pigovian ta ...
).
History and rationale
''Excise'' is derived from the Dutch ''accijns'', which is presumed to come from the Latin ''accensare'', meaning simply "to tax".
Excise was introduced in the mid 17th century under the
Puritan
The Puritans were English Protestants in the 16th and 17th centuries who sought to purify the Church of England of Catholic Church, Roman Catholic practices, maintaining that the Church of England had not been fully reformed and should become m ...
regime. In the
British Isles
The British Isles are a group of islands in the North Atlantic Ocean off the north-western coast of continental Europe, consisting of the islands of Great Britain, Ireland, the Isle of Man, the Inner and Outer Hebrides, the Northern Isles, ...
, upon
the Restoration of the Monarchy, many of the Puritan social restrictions were overturned, but excise was re-introduced, under the
Tenures Abolition Act 1660
The Tenures Abolition Act 1660 (12 Car 2 c 24), sometimes known as the Statute of Tenures, was an Act of the Parliament of England which changed the nature of several types of feudal land tenure in England. The long title of the Act was ''An act ...
, in lieu of rent, for
tenancies of royally-owned land which had not already become
socage
Socage () was one of the feudal duties and land tenure forms in the Feudalism, English feudal system. It eventually evolved into the freehold tenure called "free and common socage", which did not involve feudal duties. Farmers held land in excha ...
. Although the affected tenancies were limited in number, the excise was levied more generally; at the time, there was thought to be a rough correspondence between the wealthy manufacturers of affected goods, and the wealthy tenants of royal land.
Excise duties or taxes continued to serve political as well as financial ends. Public safety and health, public morals, environmental protection, and national defense are all rationales for the imposition of an excise. In defense of excises on strong drink,
Adam Smith
Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——— ...
wrote: "It has for some time past been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people."
Samuel Johnson
Samuel Johnson (18 September 1709 – 13 December 1784), often called Dr Johnson, was an English writer who made lasting contributions as a poet, playwright, essayist, moralist, critic, biographer, editor and lexicographer. The ''Oxford ...
was less flattering in
his 1755 dictionary:
As a deterrent, excise is typically directed towards three broad categories of harm:
* health risks from abusing toxic substances (thus making it a kind of
sumptuary tax
Sumptuary laws (from Latin ''sūmptuāriae lēgēs'') are laws that try to regulate consumption. ''Black's Law Dictionary'' defines them as "Laws made for the purpose of restraining luxury or extravagance, particularly against inordinate expendit ...
); typically this includes
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
and
alcohol
Alcohol most commonly refers to:
* Alcohol (chemistry), an organic compound in which a hydroxyl group is bound to a carbon atom
* Alcohol (drug), an intoxicant found in alcoholic drinks
Alcohol may also refer to:
Chemicals
* Ethanol, one of sev ...
* environmental damage (thus acting as a
green tax
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
); this usually includes
fossil fuel
A fossil fuel is a hydrocarbon-containing material formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. The main fossil fuels are coal, oil, and natural gas. Fossil fuels m ...
s (such as
gasoline
Gasoline (; ) or petrol (; ) (see ) is a transparent, petroleum-derived flammable liquid that is used primarily as a fuel in most spark-ignited internal combustion engines (also known as petrol engines). It consists mostly of organic co ...
)
* socially damaging /
morally
Morality () is the differentiation of intentions, decisions and actions between those that are distinguished as proper (right) and those that are improper (wrong). Morality can be a body of standards or principles derived from a code of cond ...
objectionable activity (thus making it a type of
vice tax
A vice is a practice, behaviour, or habit generally considered immoral, sinful, criminal, rude, taboo, depraved, degrading, deviant or perverted in the associated society. In more minor usage, vice can refer to a fault, a negative character tr ...
or
sin tax
A sin tax is an excise tax specifically levied on certain goods deemed harmful to society and individuals, such as alcohol, tobacco, drugs, candies, soft drinks, fast foods, coffee, sugar, gambling, and pornography. In contrast to Pigovian ta ...
); usually this includes
gambling
Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three el ...
, and can include
prostitution
Prostitution is the business or practice of engaging in Sex work, sexual activity in exchange for payment. The definition of "sexual activity" varies, and is often defined as an activity requiring physical contact (e.g., sexual intercourse, n ...
(including
solicitation
Solicitation is the act of offering, or attempting to purchase, goods and/or services. Legal status may be specific to the time or place where it occurs. The crime of "solicitation to commit a crime" occurs when a person encourages, "solicits, r ...
and
pimp
Procuring or pandering is the facilitation or provision of a prostitute or other sex worker in the arrangement of a sex act with a customer. A procurer, colloquially called a pimp (if male) or a madam (if female, though the term pimp has still ...
ing) in places where it is legal
Monies raised through excise may be
earmarked for redress of specific social costs commonly associated with the product or service on which it is levied. Tobacco tax revenues, for example, might be spent on government anti-smoking campaigns, or healthcare for cancer, heart disease, vascular disease, lung disease, and so on.
In some countries, excise is also levied on some goods for purely punitive reasons. Many US states impose excise on illegal substances;
these places do not consider it to be a revenue source, but instead regard it as a means of imposing a greater level of punishment, by opening up convicted criminals to the charge of
tax evasion
Tax evasion is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxp ...
.
Theoretical foundations on specific taxation
The economic analysis of excise taxes has its beginnings with Atkinson and Stiglitz in 1976 stating that if income taxes were optimal there would be no need for specific taxes. But, "if income taxation is not optimal, excise have a role to play, because they are relatively efficient sources of revenue, improve resource allocation
by internalizing the external costs associated with the consumption or production of excisable products, discourage the consumption of products considered harmful, serve as a proxy for charging road users for the cost of government-provided services, or promote progressivity in taxation."
.
This is how Sijbren Cnossen sets out five main rationales for the use of excise duties:
1.Revenue-raising efficiency aspects. This is based on the classic argument of the "Ramsey rule". This means that in certain cases it is optimal to differentiate tax rates on consumption according to the price elasticity of each taxed good or service.
2.Externality-correcting issues. These are surcharges for the cost that consumers or producers of certain goods impose on society as a whole but which is not reflected in the price. In other words, there is a negative externality and, therefore, there must be a special tax that tries to correct it. Economically it means that "the marginal cost of an individual consumer or producer's action is less than the marginal cost of his action to society and, as a result, the individual engages in more of the activity than is socially optimal".
It has its basis in Pigou's theory where the imposition of a special tax on activity equal to the marginal cost of the harm caused to others would correct the negative externality.
3. Information failures and internality-correcting arguments. This refers to the fact that the lack of information or education about the consumption of certain harmful products has to be corrected by state intervention through the implementation of specific taxes. This is, for example, the case for alcohol, tobacco or sugary products. Because of the damage they cause to health and the illnesses they generate in people, it is decided to tax them specifically.
4. Benefit-charging features. This refers to specific taxes derived from the use of public infrastructures to cover the costs of their construction and maintenance. The clearest example is that of roads, where we find the consumption of road infrastructure, the environmental costs of its use, congestion costs referring to the cost of the added time imposed on drivers and the costs of accidents. This will be financed by specific taxes such as vehicle licensing, road tax, fuel taxes, etc.
5.Progressivity-enhancing aspects. Excise duties on high-value products, i.e. luxury goods, are included. In this way, the consumption of certain products that are only within the reach of high incomes is taxed, thus reinforcing a progressive tax system based on their consumption
Targets of taxation
Tobacco, alcohol and gasoline
These are the three main targets of excise taxation in most countries around the world. They are everyday items of mass usage (even, arguably, "necessity") which bring significant revenue for governments. The first two are considered to be legal drugs, which are a cause of many illnesses (e.g.
lung cancer
Lung cancer, also known as lung carcinoma (since about 98–99% of all lung cancers are carcinomas), is a malignant lung tumor characterized by uncontrolled cell growth in tissue (biology), tissues of the lung. Lung carcinomas derive from tran ...
,
cirrhosis of the liver
Cirrhosis, also known as liver cirrhosis or hepatic cirrhosis, and end-stage liver disease, is the impaired liver function caused by the formation of scar tissue known as fibrosis due to damage caused by liver disease. Damage causes tissue repai ...
), which are used by large swathes of the population, both being widely recognized as
addictive
Addiction is a neuropsychological disorder characterized by a persistent and intense urge to engage in certain behaviors, one of which is the usage of a drug, despite substantial harm and other negative consequences. Repetitive drug use oft ...
. Gasoline (or petrol), as well as diesel and certain other fuels, meanwhile, have excise tax imposed on them mainly because they pollute the environment and to raise funds to support the transportation infrastructure.
Cannabis
Following the
legalization of non-medical cannabis in the United States
In the United States, the non-medical use of cannabis is legalized in 21 states (plus Guam, the Northern Mariana Islands, and the District of Columbia) and decriminalized in 10 states (plus the U.S. Virgin Islands) as of November 2022. '' De ...
, states that have implemented legal markets have imposed new excise taxes on sales of
cannabis
''Cannabis'' () is a genus of flowering plants in the family Cannabaceae. The number of species within the genus is disputed. Three species may be recognized: ''Cannabis sativa'', '' C. indica'', and '' C. ruderalis''. Alternatively ...
products. These taxes have been used to build support for legalization initiatives by raising revenue for general spending purposes.
Narcotics
Some U.S. states tax transactions involving illegal drugs.
Gambling
Gambling ''licences'' are subject to excise in many countries today. In 18th-century
England
England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe b ...
, and for a brief time in
British North America
British North America comprised the colonial territories of the British Empire in North America from 1783 onwards. English overseas possessions, English colonisation of North America began in the 16th century in Newfoundland (island), Newfound ...
, gambling ''itself'' was for a time also subject to taxation, in the form of
stamp duty
Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). A physical revenu ...
, whereby a
revenue stamp
A revenue stamp, tax stamp, duty stamp or fiscal stamp is a (usually) adhesive label used to designate collected taxes or fees on documents, tobacco, alcoholic drinks, drugs and medicines, playing cards, hunting licenses, firearm registration, ...
had to be placed on the
ace of spades
The Ace of Spades (also known as the Spadille and Death Card) is traditionally the highest and most valued card in the deck of playing cards in English-speaking countries. The actual value of the card varies from game to game.
Design
The orn ...
in every
pack of cards
A playing card is a piece of specially prepared card stock, heavy paper, thin cardboard, plastic-coated paper, cotton-paper blend, or thin plastic that is marked with distinguishing motifs. Often the front (face) and back of each card has a fi ...
to demonstrate that the duty had been paid (hence the elaborate designs that evolved on this card in many packs as a result). Since stamp duty was originally only meant to be applied to
documents
A document is a writing, written, drawing, drawn, presented, or memorialized representation of thought, often the manifestation of nonfiction, non-fictional, as well as fictional, content. The word originates from the Latin ''Documentum'', w ...
(and cards were categorized as such), the fact that
dice
Dice (singular die or dice) are small, throwable objects with marked sides that can rest in multiple positions. They are used for generating random values, commonly as part of tabletop games, including dice games, board games, role-playing g ...
were also subject to stamp duty (and were in fact the only non-paper item listed under the
Stamp Act 1765
The Stamp Act 1765, also known as the Duties in American Colonies Act 1765 (5 Geo. III c. 12), was an Act of the Parliament of Great Britain which imposed a direct tax on the British colonies in America and required that many printed materials i ...
) suggests that its implementation to cards and dice can be viewed as a type of excise duty on gambling.
[Stamp Act History Project, Retrieved July 2009.]
Profits of
bookmaker
A bookmaker, bookie, or turf accountant is an organization or a person that accepts and pays off bets on sporting and other events at agreed-upon odds.
History
The first bookmaker, Ogden, stood at Newmarket in 1795.
Range of events
Bookma ...
s are subject to
General Betting Duty in the United Kingdom.
Prostitution
Prostitution has been proposed to bear excise tax in separate
bills in the
Canadian Parliament
The Parliament of Canada (french: Parlement du Canada) is the federal legislature of Canada, seated at Parliament Hill in Ottawa, and is composed of three parts: the King, the Senate, and the House of Commons. By constitutional convention, the ...
(2005), and in the
Nevada Legislature
The Nevada Legislature is a bicameral body, consisting of the lower house, the Assembly, with 42 members, and the upper house, the Senate, with 21. With a total of 63 seats, the Legislature is the third-smallest bicameral state legislatur ...
(2009) – proposed wordings:
* "5.5 Implementation of an excise tax on prostitution, the brothel is taxed and passed it on." (Canada)
* "An excise tax is hereby imposed on each patron who uses the prostitution services of a prostitute in the amount of $5 for each calendar day or portion thereof that the patron uses the prostitution services of that prostitute." (Nevada)
Unhealthy products
Excise taxes on unhealthy products include specific taxes on calorie-dense and nutrient-poor food products that are harmful to health. As with environmental taxes, they are not intended to raise revenue but to modify consumer behaviour towards the consumption of food products that are healthy for human health. These include the taxation of specific products such as fast food or high-sugar beverages.
For example, the World Health Organisation has indicated that the tax on sugary drinks would have to be at least 20% for this measure to have a real impact on obesity and cardiovascular disease. Countries that already have specific taxes on sugary drinks include Norway, Hungary, Finland and France.
The introduction of these special taxes on unhealthy products not only has a short-term impact in terms of reducing consumption, but it is considered that in the long term it will also have positive effects on the welfare state of countries with public health. In other words, if society improves its consumption habits, it will be healthier in the future and diseases resulting from the consumption of unhealthy products will be prevented. This will reduce the need for medical services, which are financed by the state and therefore mean lower health care costs for governments.
Environmentally harmful products
In recent years, the creation or increase of excise taxes on certain existing consumer products whose production leads to environmental damage is being considered. The declaration of a climate emergency by international organisations such as the UN and the OECD warns that the current production model is and will have negative effects on life on the planet due to the current high level of pollution.
This is why one way to internalise the negative externality derived from productive activity is the inclusion of special taxes on certain products that are the main cause. These include energy, hydrocarbons and certain means of transport. The aim is to reduce their consumption while at the same time generating revenue to mitigate the negative effects of their consumption. They are therefore excise taxes that serve purposes other than simply to raise revenue.
Other types
Salt, paper and coffee
One of the most notorious taxes in the whole of history was France's
gabelle of salt
The ''gabelle'' () was a very unpopular tax on salt in France that was established during the mid-14th century and lasted, with brief lapses and revisions, until 1946. The term ''gabelle'' is derived from the Italian ''gabella'' (a duty), itself ...
. Although that was a sales tax, rather than an excise, salt has been subject to excise in some countries, along with many other substances which would, in today's world, seem rather unusual, such as
paper
Paper is a thin sheet material produced by mechanically or chemically processing cellulose fibres derived from wood, rags, grasses or other vegetable sources in water, draining the water through fine mesh leaving the fibre evenly distributed ...
, and
coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulant, stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
S ...
. In fact,
salt
Salt is a mineral composed primarily of sodium chloride (NaCl), a chemical compound belonging to the larger class of salts; salt in the form of a natural crystalline mineral is known as rock salt or halite. Salt is present in vast quantitie ...
was taxed as early as the second century,
[
by J.D. Sosin & J.F. Oates, University of Cologne, 1997. Mention of salt tax in early 3rd century papyrus (pp. 6–7). Retrieved July 2009.] and as late as the twentieth.
[ by Scott Graham, Emory University, 1998. Discussion of salt excise in 1930s India. Retrieved July 2009.]
Many different reasons have been given for the taxation of such substances, but have usually – if not explicitly – revolved around the historical scarcity of the substance, and their correspondingly high value at the time; governments clearly felt entitled to a share of the profits that traders made on them.
Window and related tax
Window tax
Window tax was a property tax based on the number of windows in a house. It was a significant social, cultural, and architectural force in England, France, and Ireland during the 18th and 19th centuries. To avoid the tax, some houses from the p ...
was introduced as a form of
income tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
, that technically preserved the financial privacy of the individual, the rationale being that wealthier individuals would have grander homes, and hence would have more windows. Furthermore, unlike income, windows cannot be easily hidden. Taxes on the same principle include
hearth tax
A hearth tax was a property tax in certain countries during the medieval and early modern period, levied on each hearth, thus by proxy on wealth. It was calculated based on the number of hearths, or fireplaces, within a municipal area and is cons ...
,
brick tax
The brick tax was a property tax introduced in Great Britain in 1784, during the reign of King George III, to help pay for the wars in the American Colonies. Bricks were initially taxed at 2 s 6 d per thousand. The brick tax was eventually abol ...
, and
wallpaper tax
The wallpaper tax was a property tax introduced in Great Britain in 1712, during the reign of Anne, Queen of Great Britain, Queen Anne. Patterned, printed, or painted wallpaper was initially taxed at 1Penny (British pre-decimal coin), d per square ...
. Excise is levied at the point of manufacture; in the case of hearth tax, and window tax, their status as excise therefore depends on whether the window/hearth can philosophically be said to truly exist before the hearth/window is installed in the property. Though technically excise, these taxes are really just substitutes for direct taxes, rather than being levied for the usual reasons for excise.
All of these taxes lead to avoidance behaviour that had a substantial impact on society and architecture. People deliberately bricked up windows to avoid window tax, used much larger bricks to reduce their liability for brick tax, or bought plain paper and had it filled in later to avoid wallpaper tax. Some poor people even forced themselves to live in cold dark rooms in order to avoid paying these taxes. By contrast, extremely wealthy individuals would sometimes parade their ability to pay the tax, as a way of showing off their wealth, by flooding their properties with windows—even to the point of installing fake ones—using fine brickwork, covering their interiors with wallpaper, and having several fireplaces in each room.
Newspapers and advertising
Newspapers were taxed in the United Kingdom from 1712 until 1853. The original tax was increased with the
Stamps Act 1814, when it was stipulated at 4d per copy. Since this made it extremely expensive for working-class families (doubling the price of a newspaper), it was pejoratively referred to as a "
tax on knowledge
Taxes on knowledge was a slogan defining an extended British campaign against duties and taxes on newspapers, their advertising content, and the paper they were printed on. The paper tax was early identified as an issue: "A tax upon Paper, is a t ...
", with people forced to rent newspapers on a per-hour basis, or else pool money together in order to buy and share. This resulted in a situation where even out-of-date newspapers were widely sought-after.
Advertisement Duty was also stipulated in the same laws and was also charged on a "per unit" basis, irrespective of the size or nature of the advertisement. Until 1833 the cost was 3s 6d, after which it was reduced to 1s 6d.
Machinery of implementation
![Friz](https://upload.wikimedia.org/wikipedia/commons/c/cf/Friz.jpg)
An excise duty is often applied by the affixation of
revenue stamp
A revenue stamp, tax stamp, duty stamp or fiscal stamp is a (usually) adhesive label used to designate collected taxes or fees on documents, tobacco, alcoholic drinks, drugs and medicines, playing cards, hunting licenses, firearm registration, ...
s to the products being sold. In the case of
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
or
alcohol
Alcohol most commonly refers to:
* Alcohol (chemistry), an organic compound in which a hydroxyl group is bound to a carbon atom
* Alcohol (drug), an intoxicant found in alcoholic drinks
Alcohol may also refer to:
Chemicals
* Ethanol, one of sev ...
, for example, producers may be given (or required to buy) a certain
bulk
Bulk can refer to:
Industry
* Bulk cargo
* Bulk liquids
* Bulk mail
* Bulk material handling
* Bulk pack, packaged bulk materials/products
* Bulk purchasing
*
Baking
* Bulk fermentation, the period after mixing when dough is left alone to f ...
amount of
excise stamp
An excise stamp is a type of revenue stamp affixed to some exciseable goods to indicate that the required excise tax has been paid by the manufacturer. They are securities printed by the finance ministry of the relevant country.
Security measure ...
s from the
government
A government is the system or group of people governing an organized community, generally a state.
In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...
and are then obliged to affix one to every packet of
cigarettes
A cigarette is a narrow cylinder containing a combustible material, typically tobacco, that is rolled into thin paper for smoking. The cigarette is ignited at one end, causing it to smolder; the resulting smoke is orally inhaled via the opp ...
or bottle of
spirits
Spirit or spirits may refer to:
Liquor and other volatile liquids
* Spirits, a.k.a. liquor, distilled alcoholic drinks
* Spirit or tincture, an extract of plant or animal material dissolved in ethanol
* Volatile (especially flammable) liquids, ...
produced.
One of the most noticeable examples of this is the development of the
Ace of Spades
The Ace of Spades (also known as the Spadille and Death Card) is traditionally the highest and most valued card in the deck of playing cards in English-speaking countries. The actual value of the card varies from game to game.
Design
The orn ...
as a particularly elaborate card, from the time when it was obliged to carry the stamp for
playing card duty.
A government-owned
monopoly
A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
- such as an
alcohol monopoly
An alcohol monopoly is a government monopoly on manufacturing and/or retailing of some or all alcoholic beverages, such as beer, wine and spirits. It can be used as an alternative for total prohibition of alcohol. They exist in all Nordic countr ...
- is another method of ensuring the excise is paid.
Around the world
Australia
The
Australian Taxation Office
The Australian Taxation Office (ATO) is an Australian statutory agency and the principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal taxation system, superannuati ...
describes an excise as "a tax levied on certain types of goods produced or manufactured in Australia. These... include alcohol, tobacco and petroleum and alternative fuels".
In
Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
, the meaning of "excise" is not merely academic, but has been the subject of numerous court cases. The
High Court of Australia
The High Court of Australia is Australia's apex court. It exercises Original jurisdiction, original and appellate jurisdiction on matters specified within Constitution of Australia, Australia's Constitution.
The High Court was established fol ...
has repeatedly held that a tax can be an "excise" regardless of whether the taxed goods are of domestic or foreign origin; most recently, in ''
Ha v New South Wales
''Ha v New South Wales''. is a High Court of Australia case that dealt with section 90 of the Australian Constitution, which prohibits States from levying excise.
Facts
The plaintiffs were charged under the ''Business Franchise Licences (Tob ...
'' (1997), the majority of the Court endorsed the view that an excise is "an inland tax on a step in production, manufacture, sale or distribution of goods", and took a wide view of the kind of "step" which, if subject to a tax, would make the tax an excise.
Canada
Both the federal and provincial governments impose excise taxes on
inelastic
In economics, elasticity measures the percentage change of one economic variable in response to a percentage change in another. If the price elasticity of the demand of something is -2, a 10% increase in price causes the demand quantity to fall ...
goods such as
cigarette
A cigarette is a narrow cylinder containing a combustible material, typically tobacco, that is rolled into thin paper for smoking. The cigarette is ignited at one end, causing it to smolder; the resulting smoke is orally inhaled via the opp ...
s,
gasoline
Gasoline (; ) or petrol (; ) (see ) is a transparent, petroleum-derived flammable liquid that is used primarily as a fuel in most spark-ignited internal combustion engines (also known as petrol engines). It consists mostly of organic co ...
,
alcohol
Alcohol most commonly refers to:
* Alcohol (chemistry), an organic compound in which a hydroxyl group is bound to a carbon atom
* Alcohol (drug), an intoxicant found in alcoholic drinks
Alcohol may also refer to:
Chemicals
* Ethanol, one of sev ...
, and for vehicle
air conditioner
Air conditioning, often abbreviated as A/C or AC, is the process of removing heat from an enclosed space to achieve a more comfortable interior environment (sometimes referred to as 'comfort cooling') and in some cases also strictly controlling ...
s. A great bulk of the retail price of cigarettes and alcohol are excise taxes. The vehicle air conditioner tax is currently set at $100 per air conditioning unit. Canada has some of the highest rates of taxes on cigarettes and alcohol in the world. These are sometimes referred to as
sin tax
A sin tax is an excise tax specifically levied on certain goods deemed harmful to society and individuals, such as alcohol, tobacco, drugs, candies, soft drinks, fast foods, coffee, sugar, gambling, and pornography. In contrast to Pigovian ta ...
es.
Germany
In Germany, the following excise is charged:
* energy:
** gasoline: €0.6545 /l (c. €0.073 /kWh)
** diesel: €0.4704 /l (c. €0.047 /kWh)
** LPG: €0.166 /kg (c. €0.0896 /l or €0.0129 /kWh)
** CNG: €0.1803 /kg (c. €0.0139 /kWh)
** heating oil: €0.13 /kg (c. €0.0119 /kWh)
* electricity:
** default: €0.0205 /kWh
** for trains, trams, etc.: €0.01142 /kWh
* nuclear fuel:
** €145 /g
* intermediate products in production of alcoholic beverages:
** default: €1.53 /l
** alcoholic contents < 15%: €1.02 /l
** intermediate products in champagne production: €1.36 /l
* tobacco:
** cigarettes: €0.0982 /cigarette + 21.69% of the retail price
** pipe tobacco: €15.66 /kg + 13.13% of the gross price
** cigars: €0.014 /cigar + 1.47% of the gross price
* coffee:
** roasted: €2.19 /kg
** instant: €4.78 /kg
* beer: c. €0.094 /l, depends on the type of beer
* spirits
* champagne:
** alcoholic contents < 6%: €0.51 /l
** alcoholic contents >= 6%: €1.36 /l
* alcopops: €0.0555 /l pure alcohol
India
In India, almost all products are subject to excise duty, provided the following four conditions are fulfilled:
*There should be a manufacture
*The manufacture was in India (excluding special economic zone)
*The manufacture should result in goods
*The goods thus manufactured must be excisable (means the goods must be specified in central excise tariff act, 1985)
In India, the Government has produced an automatic centralised system for paying excise. With this, manufacturers can easily pay their excise online on every 5th of the following month through GAR-7.
United Kingdom
In the United Kingdom, the following forms of excise are levied on goods and
services:
*
Air Passenger Duty
Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom or Isle of Man airport on an aircraft that has an authorised take-off weight of more than 5.7 tonnes or more than twenty se ...
(
Finance Act 1994)
*
Aggregates Levy (
Finance Act 2001)
* Alcohol duties (
Beer Duty,
Wine Duty,
Cider Duty,
Spirits Duty
Spirit or spirits may refer to:
Liquor and other volatile liquids
* Spirits, a.k.a. liquor, distilled alcoholic drinks
* Spirit or tincture, an extract of plant or animal material dissolved in ethanol
* Volatile (especially flammable) liquids, ...
) (
Alcoholic Liquor Duties Act 1979
Alcoholism is, broadly, any drinking of alcohol that results in significant mental or physical health problems. Because there is disagreement on the definition of the word ''alcoholism'', it is not a recognized diagnostic entity. Predomin ...
)
*
Bingo Duty (
Betting and Gaming Duties Act 1981
Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three elem ...
)
*
Climate Change Levy
The Climate Change Levy (CCL) is a tax on energy delivered to non-domestic users in the United Kingdom.
Scope and purpose
Introduced on 1 April 2001 under the Finance Act 2000, it was forecast to cut annual emissions by 2.5 million tonnes b ...
(
Finance Act 2000
The Finance Act 2000 (c 17) is an Act of Parliament, Act of the Parliament of the United Kingdom prescribing changes to excise, excise duties, Value Added Tax (United Kingdom), Value Added Tax, Income Tax, Corporation Tax, Stamp Duty and Capital ...
)
* Gambling duties (
General Betting Duty,
Pool Betting Duty
Pool may refer to:
Water pool
* Swimming pool, usually an artificial structure containing a large body of water intended for swimming
* Reflecting pool, a shallow pool designed to reflect a structure and its surroundings
* Tide pool, a rocky poo ...
,
Remote Gaming Duty
Remote may refer to:
Arts, entertainment, and media
* ''Remote'' (1993 film), a 1993 movie
* ''Remote'' (2004 film), a Tamil-language action drama film
* ''Remote'' (album), a 1988 album by Hue & Cry
* Remote (band), ambient chillout band
* ' ...
) (
Finance Act 2014
A Finance Act is the headline fiscal (budgetary) legislation enacted by the UK Parliament, containing multiple provisions as to taxes, duties, exemptions and reliefs at least once per year, and in particular setting out the principal tax rates f ...
)
*
HGV Road User Levy (
HGV Road User Levy Act 2013)
*
Hydrocarbon Oil Duty (
Hydrocarbon Oil Duties Act 1979
In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons are examples of group 14 hydrides. Hydrocarbons are generally colourless and hydrophobic, and their odors are usually weak or ex ...
)
*
Landfill tax (
Finance Act 1996
A Finance Act is the headline fiscal (budgetary) legislation enacted by the UK Parliament, containing multiple provisions as to taxes, duties, exemptions and reliefs at least once per year, and in particular setting out the principal tax rates f ...
)
*
Machine Games Duty
Machine Games Duty is a tax in the United Kingdom. It is payable for each premises which hosts slot machine
A slot machine (American English), fruit machine (British English) or poker machine (Australian English and New Zealand English) is a ...
(
Finance Act 2012) (formerly Amusement Machine Licence Duty)
*
Tobacco Duty
Tobacco Duty or Tobacco Products Duty, is a tax levied on tobacco products manufactured in or imported into the United Kingdom.
History
Excise duty on tobacco products was first introduced in 1660. The current form of excise duty was introduced ...
(
Tobacco Products Duty Act 1979
Tobacco is the common name of several plants in the genus ''Nicotiana'' of the Family (biology), family Solanaceae, and the general term for any product prepared from the curing of tobacco, cured leaves of these plants. Nicotiana#Species, M ...
)
*
Vehicle Excise Duty Vehicle Excise Duty (VED; also known as "vehicle tax", "car tax", and more controversially as "road tax", and formerly as a "tax disc") is an annual tax that is levied as an excise duty and which must be paid for most types of powered vehicles which ...
(
Vehicle Excise and Registration Act 1994
A vehicle (from la, vehiculum) is a machine that transports people or cargo. Vehicles include wagons, bicycles, motor vehicles (motorcycles, cars, trucks, buses, mobility scooters for disabled people), railed vehicles (trains, trams), water ...
)
Historically, these were collected by the ''Board of Excise'', which was subsequently combined with the
Inland Revenue
The Inland Revenue was, until April 2005, a department of the British Government responsible for the collection of direct taxation, including income tax, national insurance contributions, capital gains tax, inheritance tax, corporation ta ...
(responsible for collecting
direct tax
Although the actual definitions vary between jurisdictions, in general, a direct tax or income tax is a tax imposed upon a person or property as distinct from a tax imposed upon a transaction, which is described as an indirect tax. There is a dis ...
es). In view of the higher likelihood of organised crime being involved in attempts at evading Excise, and its association with
smuggling
Smuggling is the illegal transportation of objects, substances, information or people, such as out of a house or buildings, into a prison, or across an international border, in violation of applicable laws or other regulations.
There are various ...
, compared with evasion attempts concerning direct taxation, the ''Board of Excise'' was later combined instead with the ''Board of Customs'', to form
HM Customs and Excise
HM Customs and Excise (properly known as Her Majesty's Customs and Excise at the time of its dissolution) was a department of the British Government formed in 1909 by the merger of HM Customs and HM Excise; its primary responsibility was the ...
. In this combined form, ''Customs and Excise'' was responsible for managing the
import
An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade.
In international trade, the importation and exportation of goods are limited ...
and
export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
of goods and services into the UK, and its officers wielded greater powers of access, arrest, and seizure, than the Police.
On 18 April 2005, ''Customs and Excise'' was merged once more with the Inland Revenue to form a new department,
HM Revenue and Customs
HM Revenue and Customs (His Majesty's Revenue and Customs, or HMRC) is a non-ministerial government department, non-ministerial Departments of the United Kingdom Government, department of the His Majesty's Government, UK Government responsible fo ...
(''HMRC''). The enormous contrast between the powers of officers of the Inland Revenue, and those of ''Customs and Excise'', initially caused several difficulties in the early life of the new organisation. Many of the monitoring and inspection functions, and corresponding powers, were later split off to form a new
UK Border Agency
The UK Border Agency (UKBA) was the border control agency of the Government of the United Kingdom and part of the Home Office that was superseded by UK Visas and Immigration, Border Force and Immigration Enforcement in April 2013. It was forme ...
, while the residual organisation is now merely responsible for the financial aspects of collection.
United States
In the United States, the term "excise" has at least two meanings: (A) any tax other than a property tax or
capitation (i.e., an excise is an indirect tax in the constitutional law sense), or (B) a tax that is simply called an excise in the language of the statute imposing that tax (an excise in the statutory law sense, sometimes called a "miscellaneous excise"). An excise under definition (A) is not necessarily the same as an excise under definition (B).
An excise (under definition B) has been defined as '"a tax upon manufacture, sale or for a business license or charter, as distinguished from a tax on real property, income or estates."
Both the federal and state governments levy excise taxes on goods such as alcohol, motor fuel, and tobacco products. The laws of the federal government and of some state governments impose excises known as the income tax. Even though federal excise taxes are geographically uniform, state excise taxes vary considerably. Taxation constitutes a substantial proportion of the retail prices on alcohol and tobacco products.
Local governments may also impose an excise tax. For example, the city of
Anchorage, Alaska
Anchorage () is the largest city in the U.S. state of Alaska by population. With a population of 291,247 in 2020, it contains nearly 40% of the state's population. The Anchorage metropolitan area, which includes Anchorage and the neighboring Ma ...
charges a cigarette tax of $1.30 per pack, which is on top of the federal excise tax and the state excise tax. In 2011, the United States federal excise tax on gasoline was 18.4 cents per gallon (4.86 ¢/L) and 24.4 cents per gallon (6.45 ¢/L) for
diesel fuel
Diesel fuel , also called diesel oil, is any liquid fuel specifically designed for use in a diesel engine, a type of internal combustion engine in which fuel ignition takes place without a spark as a result of compression of the inlet air and t ...
.
European Union
In the European Union, harmonisation of excise duties has been considered from the outset. However, the first obstacle was the great heterogeneity of these taxes in the different Member States.
Thus, in 1972, excise duties on mineral fuels and oils, alcohol and alcohol derivatives,
fermented beverages and manufactured tobacco were harmonised. Due to the differences between countries and the impossibility of reaching an agreement whereby the tax would be fixed and the same for all member countries, it was decided to intervene in excise duties in two ways. The first by establishing a minimum tax rate equal for all member countries and, secondly, by establishing a long-term objective to which all member countries should converge.
According to Eurostat data from 2014, it is known that energy taxes represent on average 16% of the implicit rate on consumption and up to 50% of excise tax revenue. Alcohol and tobacco account for only 8% of the implicit rate on consumption. As a whole, excise duties account for around 3% of GDP as a weighted average for the countries that make up the European Union.
Criticisms
Critics of excise have interpreted and described it as simply being a way for government to levy further and unnecessary taxation on the population. The presence of ''refunds of duty'' under the UK's list of ''excisable activities'' has been used to support this argument, as it results in taxation being implemented on persons even when they would normally be exempt from paying other types of taxes (the reason they qualify for the refund in the first place).
Furthermore, excise sometimes
doubles up with other taxes, and in particular with
customs duties
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
(except, for
duty-free
A duty-free shop (or store) is a retail outlet whose goods are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country, w ...
items). If a good is purchased in one country and later exported to another, excise must be paid when it was manufactured, and customs then paid when it enters the second country; in a sense, the "creation" of the good has been taxed twice, although from the second country's point of view, it only came into existence as a taxable good at the border.
In some countries, such as the UK, excise has generally been limited to goods which are luxuries or a risk to health or morals, but this is not the case everywhere. Taxation on medicines, pharmaceuticals and medical equipment has been an issue of contention, especially in developing countries, due to the fact that this can cause the prices of medicines, and medical procedures, to become inflated, even when potentially lifesaving; this has sometimes forced healthcare providers to limit the number of operations performed.
WHO/HAI Project on Medicine Prices and Availability
WHO
Who or WHO may refer to:
* Who (pronoun), an interrogative or relative pronoun
* Who?, one of the Five Ws in journalism
* World Health Organization
Arts and entertainment Fictional characters
* Who, a creature in the Dr. Seuss book '' Horton He ...
and Human Awareness Institute, May 2011. Retrieved Apr 2013.
In some countries, goods which are illegal are nevertheless also subject to excise, and the ground of ''tax evasion'' has subsequently been used to prosecute criminal gang leaders, when it has not been possible to prosecute the criminal activity more directly. It has also been argued that, by taxing banned substances, some US states are able to gain additional revenues. In some cases, legislation creates an incentive for the state to turn a blind eye to certain criminal activity, by allowing dealers to preserve their anonymity, and thus enabling revenue to be collected without leading to the arrest of the perpetrator:
:
See also
* Customs
Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs ...
* Securities turnover excise tax
References
External links
*
*
{{Authority control
Tax terms