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Rapid Tax, History Of Tea ? Taxes And Smuggling In 18th Century England

Posted on 3/27/2008 at 2:47 AM - 0 Comments - Post Comment - Link

Rapid Tax, 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 *** 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 anti-tea 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 pre-reduction 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!

Marcus Stout is President of the Golden Moon Tea Company. For more information about tea, green tea and wu long tea go to

Rapid Tax, Tax Lawyer May Reduce Taxes Payable

Posted on 3/5/2008 at 1:40 AM - 0 Comments - Post Comment - Link

Rapid Tax, Tax Lawyer May Reduce Taxes Payable

The purpose of hiring a tax lawyer by an individual is to reduce the total amount of tax payable. It also includes other payables such as IRS interests, penalties etc. Contrarily, a Tax Lawyer can resolve wage garnishments in IRS issues. There are many ways by which a Tax Lawyer analyzes the ?tax payable? issue of an individual. In general, a tax Lawyer would be required by an individual to resolve tax issues in Income Tax payments, preparation of late tax returns, IRS wage garnishment, tax liens dealings etc.

If there is a dispute either between two parties, the Tax lawyers of both parties can analyze and negotiate offers made by the other can try to bring about a compromise. This is called as the Offer in compromise and is a very popular legal program / process. In an Offer in compromise, a tax payer, for the purpose of settlement of tax bills that are delinquent, is offered to pay the State / IRS a lesser sum of amount. An optimal amount can be arrived at by the help of a Tax Lawyer.

If there is a situation where an individual is liable to pay a tax amount to the government; a tax lawyer analyzes the tax clauses prescribed as per law and arrives at the best optimal compromise (the lowest possible amount) that should be paid as tax by the individual. One of the main problems a tax payer might encounter is with respect to wage garnishments. The magnitude of penalties levied for non-compliance in IRS issues or with tax agencies in States are quite heavy. This would definitely need a legal expert?s advice. Consulting a Tax Attorney is the best option during these situations and can legally negotiate with the tax agencies to release wage garnishments or IRS amounts. In instances where individuals have missed filing their tax returns, or are way behind the years to file their tax returns, a Tax Attorney can solve such issues, however complex they may be. The Tax Attorney can prepare back tax calculations to be filed at the government?s tax collection office and reduce the criminal prosecution risk that the individual might face during these instances.

In corporate and business houses, a tax lawyer is the key person who resolves tax issues involved in employee payrolls. There have been enormous instances where tax lawyers have saved corporate houses from seizures due to payroll taxes. In businesses that run in huge losses, or sometimes even run into bankruptcy, a tax lawyer is capable of analyzing the accounts and help to bring out a ?nil tax payable? situation as per the clauses prescribed in law. The Tax Attorney is a key person who can legally analyze tax clauses and resolve issues when a corporate or an individual is caught in a tax debt.

frank j vanderlugt owns and operates Tax Attorney

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