History Of Tea Taxes And Smuggling In 18th Century England

History Of Tea Taxes And Smuggling In 18th Century England

History of​ Tea Taxes and​ Smuggling in​ 18th Century England
Since its introduction to​ the​ western world,​ tea has grown in​ popularity and​ is​ now the​ second most popular beverage in​ the​ world after water . ​
Throughout its history tea demand has grown as​ a​ result of​ its good taste,​ health and​ medicinal properties and​ increasingly efficient channels of​ production and​ distribution . ​

Perhaps the​ most important benefit of​ tea for​ tea drinker is​ that aura of​ good feeling and​ stress reduction for​ those who regularly consume the​ beverage . ​

Tea growing and​ distribution became big business throughout the​ world as​ enterprising individuals and​ companies invested in​ tea plantations and​ distribution assets to​ meet the​ growing demand for​ tea . ​
as​ the​ business grew,​ national governments saw tea as​ a​ valuable source of​ revenue . ​
Government regulation and​ taxation often had a​ detrimental effect on​ free commerce and​ customer satisfaction however . ​

The growth in​ popularity of​ tea in​ a​ country like England,​ a​ country whose tea culture is​ well established,​ is​ a​ good case study on​ the​ social and​ fiscal influences on​ the​ consumption of​ tea . ​

During the​ sixteenth century in​ England,​ tea became a​ popular beverage mainly for​ the​ upper classes . ​
Based upon a​ unique taste and​ realization of​ tea health benefits,​ more efficient channels of​ distribution and​ a​ growing understanding of​ the​ life style benefits of​ tea,​ imports grew slowly at​ first . ​
Nevertheless,​ this growth accelerated into the​ 18th century . ​

During this time taxation,​ smuggling and​ adulteration of​ tea became significant factors in​ the​ English tea culture . ​

Considering tea a​ tropical luxury,​ the​ English government saw revenue raising opportunities in​ tea to​ fund a​ military buildup that supported expansion of​ the​ British Empire . ​

By the​ eighteenth century,​ tea was a​ hugely popular drink in​ Britain,​ but,​ to​ the​ ordinary consumer,​ it​ was also prohibitively expensive . ​
Smuggling of​ tea became a​ growth industry in​ England as​ smugglers profited as​ they met the​ demand for​ lower cost tea by ignoring oppressive customs duties . ​

This created a​ demand among the​ British population for​ cheaper tea,​ and​ when that demand could not be met by legal means,​ a​ great opportunity was presented to​ those people who were less than concerned about breaking the​ law . ​
From the​ beginning of​ the​ eighteenth century,​ the​ trade in​ smuggled tea began to​ flourish . ​

This was tea that was brought in​ illegally it​ was not imported by the​ East India Company,​ and​ it​ did not pass through customs . ​
Being light and​ easy to​ transport,​ tea was a​ very profitable smuggling commodity even more so than ​alcohol​ in​ which there was also a​ healthy smuggling trade . ​

The State Needs Money
Like any state,​ 18th Century England was no exception to​ the​ need to​ raise revenue . ​
Mercantilism was the​ English policy and​ a​ military presence was required to​ support the​ English role in​ overseas colonies and​ possessions . ​
Expansion of​ world interests requires two things a​ strong military and​ funds to​ support military activities . ​

The state looked to​ import duties and​ excise taxes as​ a​ way to​ raise the​ necessary funds and​ these taxes soon became excessive . ​
the​ Government had to​ legitimize the​ tax and​ did so by treating tea initially as​ a​ luxury that could support high duties in​ the​ eyes of​ the​ public . ​
Later,​ tea was correctly classified as​ a​ necessity that would only support lower levels of​ taxation . ​

Before the​ Tax Reform Act of​ 1784 for​ example,​ the​ price of​ tea was burdened with taxes and​ duties of​ over 100% of​ the​ pretax price . ​

In addition,​ although the​ supply of​ tea continued to​ increase as​ tea plantations became more productive,​ the​ price remained high as​ the​ East India Company granted a​ monopoly on​ tea imports by the​ English Government artificially manipulated supplies to​ maintain prices . ​

High Taxes and​ Manipulated Supply Lead to​ Smuggling as​ a​ Growth Industry
A pattern developed in​ English commerce in​ tea . ​
as​ taxes were raised on​ tea imports,​ smuggling increased in​ a​ successful attempt to​ meet the​ underlying growth in​ demand for​ tea . ​
But smuggling and​ high taxes had a​ direct relationship and​ smuggling produced a​ negative effect on​ the​ English economy and​ population at​ large . ​

Although taxation is​ important for​ raising revenue,​ most economists know that high taxation encouraged smuggling,​ and​ the​ quantity of​ tea being smuggled was directly linked to​ the​ level of​ duty levied on​ legal tea imports . ​
in​ England,​ at​ the​ beginning of​ the​ eighteenth century,​ the​ government’s need to​ finance a​ war in​ Spain led to​ an​ increase in​ taxation on​ tea,​ and​ the​ price of​ leaves rose dramatically . ​

The tax was outrageous and​ fueled the​ activities of​ the​ tea smugglers . ​
Duty was later slashed by Henry Pelham in​ 1745 . ​
This meant that more tea was brought in​ legally the​ quantity passing through customs more than doubled and​ the​ increase of​ tea imports on​ which duty was paid actually led to​ the​ government’s revenues from tea being increased . ​

But in​ the​ 1750s the​ need to​ finance another war led to​ the​ duty on​ tea being raised again . ​
This in​ turn led to​ a​ surge in​ the​ business of​ the​ smugglers,​ which continued to​ flourish throughout the​ third quarter of​ the​ eighteenth century . ​

Though illegal,​ the​ smugglers had the​ support of​ millions of​ people who could not otherwise afford to​ buy tea . ​

Much tea was smuggled in​ from continental Europe,​ shipped into Britain via the​ Channel Islands and​ the​ Isle of​ Man . ​
Although smuggling was widespread,​ in​ the​ first decades of​ the​ eighteenth century many of​ the​ smugglers themselves operated on​ a​ very small scale . ​
Many smugglers used their own small boats and​ the​ contraband tea was then sold on​ to​ personal contacts and​ local shopkeepers . ​

It was by now widely acknowledged that the​ only way to​ tackle the​ smuggling problem was to​ make tea cheaper in​ effect,​ to​ reduce the​ duty paid on​ it . ​
So the​ East India Company,​ who had powerful allies in​ the​ British Parliament,​ lobbied for​ the​ duty to​ be lowered . ​
the​ power of​ the​ corporate world was thus added to​ popular demand for​ permanent change in​ the​ tea tax . ​

It was when William Pitt the​ Younger became Prime Minister in​ 1783 that the​ work of​ the​ antitea duty forces finally achieved their goal . ​
as​ a​ former Chancellor of​ the​ Exchequer,​ Pitt was familiar with tax policy and​ the​ impact of​ high taxes on​ tax revenue . ​
He understood that raising the​ tax rate often resulted in​ decreased tax revenue . ​

Pitt slashed the​ tax on​ tea,​ and​ made up for​ the​ revenue lost by hugely increasing the​ window tax . ​
This was a​ property tax which was much easier to​ enforce . ​
the​ Commutation Act of​ 1784 reduced the​ tax on​ tea from 119 per cent to​ 12 . ​
5 per cent . ​
the​ smuggling of​ tea ceased to​ be profitable,​ and​ the​ smuggling trade vanished virtually overnight . ​
More importantly tea was treated as​ a​ necessity rather than a​ luxury with long term implications for​ lower tea taxes . ​

The consumption of​ lower taxed tea rocketed,​ so much so that even with the​ reduced rate of​ tax,​ the​ amount of​ revenue collected from tea was soon restored and​ eventually exceeded prereduction revenue . ​
Equally important,​ tea became the​ standard beverage for​ most of​ the​ entire English population . ​

Tea drinkers had the​ window tax to​ thank in​ part for​ the​ boost in​ popularity of​ their favorite beverage!

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