An excise or excise tax is an inland tax on the sale, or production for sale, of specific
goods or a tax on a good produced for sale, or sold, within a country or licenses for
specific activities.
Excises are distinguished from customs duties, which are taxes on importation.
Excises are inland taxes, whereas customs duties are border taxes.
An excise is considered an indirect tax, meaning that the producer or seller who pays the tax
to the government is expected to try to recover or shift the tax by raising the price paid
by the buyer.
Excises are typically imposed in addition to another indirect tax such as a sales tax
or value added tax.
In common terminology, an excise is distinguished from a sales tax or VAT in three ways: an
excise typically applies to a narrower range of products; an excise is typically heavier,
accounting for a higher fraction of the retail price of the targeted products; and 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 VAT is an ad valorem tax and proportional to the price of the good.
Typical examples of excise duties are taxes on gasoline and other fuels, and taxes on
tobacco and alcohol.
Definition The etymology of the word excise is derived
from the Dutch accijns, which is presumed to come from the Latin accensare, meaning
simply "to tax".
Regulatory and legal definitions of 'excise' vary by country.
For example: In India, an excise is described as an indirect
tax levied and collected on the goods manufactured in India.
In the United Kingdom, HM Revenue and Customs lists "alcohol, environmental taxes, gambling,
holdings & movements, hydrocarbon oil, money laundering, refunds of duty, revenue trader's
records, tobacco duty, and visiting forces" as being subject to excise.
Some of the listed items are not goods, but rather services.
The Australian Taxation Office 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, the meaning of "excise" is not merely academic, but has been the subject
of numerous court cases.
The High Court of Australia 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, 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.
Rationale In defense of excises on strong drink, Adam
Smith 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 was less flattering in his 1755 dictionary: "EXCI'SE.
n.s.
... A hateful tax levied upon commodities, and adjudged not by the common judges of property,
but wretches hired by those to whom excise is paid."
Monies raised through excise may be earmarked for redress of specific social costs commonly
associated with the product or service being taxed.
Tobacco tax revenues, for example, might be spent on government anti-smoking campaigns.
Excise duties or taxes often 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.
Public safety and health deter individuals from harming their health
by abusing substances such as tobacco and alcohol, thus making excise a kind of sumptuary
tax, or deter them from engaging in morally objectionable
activities such as gambling and prostitution – thus making it a type of vice tax or sin
tax
Environmental protection deter individuals or organizations from harming
the general environment, including curbing activities which contribute to pollution,
or which harm the natural environment.
Defense including taxation directly levied on other
countries' militaries and/or governments, such as the UK's taxation on "visiting forces"
Punitive Many US states impose taxes on illegal drugs,
while the UK government imposes excise on money laundering and on "visiting forces".
These taxes are not considered revenue sources, but rather exist to allow governments greater
leverage for punishments and reparations/war reparations – based around the concept of
tax evasion – which can be imposed in the event that the perpetrator is caught and tried.
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 which bring significant revenue for governments.
The first two are considered to be legal drugs, which are a cause of many illnesses, which
are used by large swathes of the population, with tobacco being widely recognized as addictive.
Gasoline, as well as diesel and other fuels, meanwhile, despite being indispensable to
modern life, have excise tax imposed on them mainly because they pollute the environment
and to raise funds to support the transportation infrastructure.
Narcotics Many US states tax illegal drugs.
Gambling Gambling licences are subject to excise in
many countries today.
In 18th-century England, and for a brief time in British North America, gambling itself
was for a time also subject to taxation, in the form of stamp duty, whereby a revenue
stamp had to be placed on the ace of spades in every pack of cards to demonstrate that
the duty had been paid.
Since stamp duty was originally only meant to be applied to documents, the fact that
dice were also subject to stamp duty suggests that its implementation to cards and dice
can be viewed as a type of excise duty on gambling.
Prostitution Prostitution has been proposed to bear excise
tax in separate bills in the Canadian Parliament, and in the Nevada Legislature - proposed wordings:
"5.5 Implementation of an excise tax on prostitution, the brothel is taxed and passed it on."
"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."
The reasons given by Canadian MPs entering the bill covered many of the above-mentioned
areas, including extra funding for police protection and better healthcare for the prostitutes
- however, so did many of the counterarguments.
Other types Salt, paper and coffee
Excise has been known to be applied to substances which would in today's world seem rather unusual,
such as salt, paper, and coffee.
In fact, salt was taxed as early as the second century, and as late as the twentieth.
Many different reasons have been given for the taxation of such substances, but have
usually - if not explicitly - revolved around the scarcity and high value of the substance,
with governments clearly feeling entitled to a share of the profits traders make on
these expensive items.
Such would the justification of salt tax, paper excise, and even advertisement duty
have been.
Window tax and Bedroom tax The window tax was introduced after controversy
arose around the introduction of income tax, which was considered to be a breach of privacy.
The rationale behind this was that the grandeur of a person's house, and hence the number
of windows, was a visible sign of their wealth – which could, furthermore, not be hidden
like income can.
One way people got around this problem was to brick up their windows.
In the case of poor people this was a big social problem, as they would often force
themselves to live in the dark in order to avoid paying this tax.
The UK's Welfare Reform Act 2012 contains a clause referred to as an "under-occupancy
penalty".
The penalty is aimed at people on welfare benefits who live in houses containing "more
bedrooms than they need".
While not officially referred to as a tax, the controversial policy is instead billed
as a way to "free up more living space for overcrowded families", but has nevertheless
been widely dubbed a "bedroom tax", and has led to comparisons to the 17th century window
tax.
While originally unofficial, the term gained wide acceptance even before it came into force
in April 2013, even being used by public organizations.
Further controversy was raised when it emerged that paedophiles and rapists will be exempt
from the tax, the loophole arising from the fact that they are not allowed to rent out
rooms.
Newspapers and Advertising – "Knowledge tax"
Newspapers were taxed in the United Kingdom from 1712 until 1853.
The original tax was increased with the 1814 Stamp Act, when it was stipulated at 4d per
copy.
Since this made it extremely expensive for working-class families, it was pejoratively
referred to as a "Tax on Knowledge", 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.
Examples Canada
Both the federal and provincial governments impose excise taxes on inelastic goods such
as cigarettes, gasoline, alcohol, and for vehicle air conditioners.
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 taxes.
United States
An excise is "a tax upon manufacture, sale or for a business license or charter," according
to Law.com's Legal Dictionary and is to be distinguished from a tax on real property,
income or estates."
In the United States, the term "excise" means: any tax other than a property tax or capitation,
or a tax that is simply called an excise in the language of the statute imposing that
tax.
An excise under definition is not necessarily the same as an excise under definition.
Both the federal and state governments levy excise taxes on goods such as alcohol, motor
fuel, and tobacco products.
And the federal and some state governments lay an excise on the exercise of federal privilege,
most widely known as the income tax.
Even though federal excise taxes are geographically uniform, state excise taxes vary considerably.
However, 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 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
and 24.4 cents per gallon for diesel fuel.
United Kingdom
Her Majesty's Customs and Excise was, until April 2005, a department of the British Government
in the UK.
It was responsible for the collection of Value added tax, Customs Duties, Excise Duties,
and other indirect taxes such as Air Passenger Duty, Climate Change Levy, Insurance Premium
Tax, Landfill Tax and Aggregates Levy.
It was also responsible for managing the import and export of goods and services into the
UK.
HMCE was merged with the Inland Revenue to form a new department, HM Revenue and Customs,
with effect from 18 April 2005.
The tax was first implemented in the UK under this name in the mid-17th century.
India
In India, almost all manufactured products are included for excise duty.
In India, for getting excise tax, Govt. of India has made Automation of Central excise
and service tax.
with this, manufacturer can easily pay their excise tax online on every 5th of following
the month through GAR-7.
Germany Germany charges the following excise taxes:
energy: gasoline: 65.45 ct/l
diesel: 47.04 ct/l LPG: 16.6 ct/kg
CNG: 18.03 ct/kg heating oil: 13.00 ct/kg
electricity: default: 2.05 ct/kWh
for trains, trams, etc.: 1.142 ct/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: 9.44 ct/cigarette + 21.8% of the
gross price pipe tobacco: 15.66 €/kg + 13.13% of the
gross price cigars: 1.4 ct/cigar + 1.47% of the gross
price
coffee: roasted: 2.19 €/kg
instant: 4.78 €/kg
beer: c. 9.4 ct/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 Machinery of implementation
An excise duty is applied by the affixation of revenue stamps to the products being sold.
In the case of tobacco or alcohol, for example, the producer buys a certain bulk amount of
excise stamps from the government and is then obliged to affix one to every packet of cigarettes
or bottle of spirits produced.
A government-owned alcohol monopoly is another way to ensure payment of the taxes.
Criticisms Critics of excise tax have interpreted and
described excise duty as simply a government's way of levying 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
where they would normally be exempt from paying other types of taxes – hence why they are
getting the refund in the first place.
Furthermore, excise is often somewhat similar to other taxes and sometimes doubles up with
them, or as in the case of customs duties: since the two taxes largely apply to the same
types of goods, people are forced to pay tax twice over on the same items - once through
excise upon purchase and a second time around through customs duties upon transportation.
Taxation on medicines, pharmaceuticals and medical equipment has been an issue of contention,
especially in developing countries, due to the fact that this tax can result in inflated
prices of ordinary and even potentially lifesaving medication, as well as raise the cost of medical
procedures, sometimes forcing healthcare providers to limit the number of operations performed.
As far as illegal drugs are concerned, it has also been argued that, by taxing banned
substances, some US states are able to gain revenues, while the legislation protects the
anonymity of the dealers –
A dealer is not required to give his/her name or address when purchasing stamps and the
Department is prohibited from sharing any information relating to the purchase of drug
tax stamps with law enforcement or anyone else.
See also Customs
Securities turnover excise tax References