Indirect Tax in United Kingdom
History
Note: there is some information about the history of indirect taxation here.
Parallel with the evolution of direct taxation, but decidedly lagging behind, is the progress of indirect taxation. As already mentioned, the right of levying dues on goods entering or leaving English ports belonged from very early times to the king. Whether this power was, in its origin, due to the protection afforded to traders and thus a kind of insurance, or the result of the royal prerogative of pre-emption is immaterial for finance. What is established is that the “prisage” of wine or levy of one cask in ten, and the taking of one-tenth or one-fifteenth of other commodities was in force. Attempts to impose additional dues were forbidden by an important article (41) of the Great Charter which recognized “the ancient and just customs.”
One of the earliest effects of parliamentary influence is manifested in the establishment of duties on wool, woolfells and leather by Edward I.’s first parliament. After some efforts by the king to gather increased duties, the “Confirmation of the Charters” (1297) forbade any increases on the amounts fixed in 1275, which were henceforth known as the ancient customs. Another attempt was made to obtain a higher scale of duties by arrangement with the merchants. The foreign traders consented to the royal proposals, which comprised duties on wine, wool, hides and wax, as well as a general tax of 1¼% on all imports and exports. Thus, in addition to the old customs of half a mark (6s. 8d.) per sack of wool and on each three hundred woolfells, and one mark (13s. 4d.) per last or load of leather, the foreign merchants paid an extra duty (or surtax) of 50% and also 2s. on the tun of wine—the so-called “butlerage.”
The privileges granted in the Carta Mercatoria (1303) were probably the consideration for accepting these enhanced dues. The English merchants, however, for the time, successfully resisted the application in their case of the higher charges, and consequently remained under the old prisage of wine. In spite of parliamentary opposition, on the ground that they amounted to an infringement of the Great Charter, the new customs were maintained in force. After being suspended in 1311 they were revived in 1322, confirmed by royal authority in 1328, and finally sanctioned by parliament in the Statute of the Staple (1353). They became a part of the permanent crown revenue from the ports, and, with the old customs, were the basis for further development.
Just as the old direct taxes were first supplemented by, and then absorbed in, the general taxation of movables, so the customs, in the strict sense, were followed by the subsidies or parliamentary grants. One great source of English wealth in the 14th century was the export of the peculiarly fine wool of the country, and the political circumstances of Edward III.’s time suggested the manipulation of the trade in this commodity for purposes of policy as well as revenue. Sometimes, in order to influence the towns of Flanders, the export of wool was absolutely prohibited; at others, export duties of varying amounts were imposed on wool, skins and leather. In the early years of the reign these arrangements were settled by agreement with the merchants.
The subsidies of this class began in 1340 and henceforward were frequently granted, though complaints were very often made. Thus, in 1348 the Commons objected to the subsidy of an export duty of £2 per sack on wool on the ground that it was really a tax on the landowners, who received a lower price for their wool in consequence of the duty. Bargains between the king and the merchants were forbidden, and this species of taxation was brought under parliamentary control by statutes passed in 1362 and 1371. Along with the special duties on wool there was an increase of the imposts on wine and general goods. By agreement with the merchants a charge of 2s. per tun on wine and 2½% on goods was levied in 1347. Between 1371 and 1376 these dues were established as parliamentary grants under the names of “Tunnage” and “Poundage,” leaving the older dues intact. (1)
Resources
Notes and References
- Encyclopedia Britannica (11th Edition)
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