Excise duty is a tax levied on the producer of certain goods, commodities and activities. It is a separate tax from VAT, and is different from it in that VAT solely affects the consumer (although, naturally, the consumer also indirectly pays the excise, as it is included in the eventual sale price of the product). The excise duty can account for as much as half the price of the goods subject to it, and sometimes more.
The Oxford Dictionary gives the origin of the word to be the Dutch accijns, itself presumed to originate from the Latin accensare - "to tax".
What is interesting about excise tax is how vague it actually is - it would be difficult, if at all possible, to find a precise definition explaining what it is that categorizes goods subject to excise tax. Lists of such goods are readily provided by governments, and it is possible to guess at what might be the motive for grouping such goods together; however, no explicit, formal definition is provided:
Contrasting these official explanations to the two scholars' remarks below on the issue of excise provides some insight into what the original motive for the tax might have been:
Looking at the types of goods, services and areas listed as excisable by many governments, and considering the thinkers' comments, we are led to the conclusion that excise duty was originally invented for some or all of the following reasons:
As already mentioned, many US states tax drugs, partly in order to be able to impose heavier punishments, as the Kansas Department of Revenue states on its website:
There are at least two major criticisms of such legislation, however - see below.
Gambling licences are subject to excise in many countries; however 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 (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 (and cards were categorized as such), the fact that dice were also subject to stamp duty (and were in fact the only non-paper item listed under the 1765 Stamp Act) suggests that its implementation to cards and dice can be viewed as a type of excise duty on gambling.
The reasons given by MPs entering the bill covered many of the abovementioned areas, including extra funding for police protection and better healthcare for the prostitutes - however, so did many of the counterarguments.
Excise (often under different names, especially before the 15th century, usually constituting of several separate laws, each referring to the individual item being taxed) 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.
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: (A) any tax other than a property tax or capitation (i.e., an indirect tax, or excise, 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), but the reverse is false.
Example: The Whiskey Tax that resulted in the Whiskey Rebellion which started in 1792.
Her Majesty's Customs and Excise (HMCE) was, until April 2005, a department of the British Government in the UK. It was responsible for the collection of Value added tax (VAT), 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 (which was responsible for the administration and collection of direct taxes) to form a new department, HM Revenue and Customs, with effect from 18 April 2003.
The tax was first implemented in the UK under this name the mid-17th century.
In many countries, 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 such stamps from the government and is then obliged to affix one to every packet of cigarettes or bottle of spirits produced.
Critics of excise tax - such as Samuel Johnson, above - 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, as in the above example, 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 (except in the case of duty-free) - once through excise upon purchase and a second time around through customs duties upon transportation. (A justification for this is that the country the items are being entered into is applying the customs partly for the same reasons as the original excise was charged, as it is the country of import which will suffer the ill environmental, health and social effects of, say, the cigarettes and alcohol being brought in; thus customs has many similar pro's and con's as has excise.)
There are at least two major criticisms of excise legislation on drugs -