Excise

These are the three main targets of excise taxation in most countries around the world. They are everyday items of mass usage (even, arguably, "necessity") which bring significant revenue for governments. The first two are considered to be legal drugs, which are a cause of many illnesses (e.g. lung cancer, cirrhosis of the liver), which are used by large swathes of the population, both being widely recognized as addictive. Gasoline (or petrol), as well as diesel and certain other fuels, meanwhile, have excise tax imposed on them mainly because they pollute the environment and to raise funds to support the transportation infrastructure.

Following the legalization of non-medical cannabis in the United States, states with implemented legal markets have imposed new excise taxes on sales of cannabis products. These taxes have been used to build support for legalization initiatives by raising revenue for general spending purposes.[6]

Some U.S. states tax transactions involving illegal drugs.[4]

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 (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 Stamp Act 1765) suggests that its implementation to cards and dice can be viewed as a type of excise duty on gambling.[7]

Profits of bookmakers are subject to General Betting Duty in the United Kingdom.

Prostitution has been proposed to bear excise tax in separate bills in the Canadian Parliament (2005), and in the Nevada Legislature (2009) – proposed wordings:

• "5.5 Implementation of an excise tax on prostitution, the brothel is taxed and passed it on." (Canada)[8]
• "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." (Nevada)[9]

Excise taxes on unhealthy products include specific taxes on calorie-dense and nutrient-poor food products that are harmful to health. As with environmental taxes, they are not intended to raise revenue but to modify consumer behaviour towards the consumption of food products that are healthy for human health. These include the taxation of specific products such as fast food or high-sugar beverages. For example, the World Health Organisation has indicated that the tax on sugary drinks would have to be at least 20% for this measure to have a real impact on obesity and cardiovascular disease. Countries that already have specific taxes on sugary drinks include Norway, Hungary, Finland and France. The introduction of these special taxes on unhealthy products not only has a short-term impact in terms of reducing consumption, but it is considered that in the long term it will also have positive effects on the welfare state of countries with public health. In other words, if society improves its consumption habits, it will be healthier in the future and diseases resulting from the consumption of unhealthy products will be prevented. This will reduce the need for medical services, which are financed by the state and therefore mean lower health care costs for governments.[10]

In recent years, the creation or increase of excise taxes on certain existing consumer products whose production leads to environmental damage is being considered. The declaration of a climate emergency by international organisations such as the UN and the OECD warns that the current production model is and will have negative effects on life on the planet due to the current high level of pollution. This is why one way to internalise the negative externality derived from productive activity is the inclusion of special taxes on certain products that are the main cause. These include energy, hydrocarbons and certain means of transport. The aim is to reduce their consumption while at the same time generating revenue to mitigate the negative effects of their consumption. They are therefore excise taxes that serve purposes other than simply to raise revenue.[11]

One of the most notorious taxes in the whole of history was France's gabelle of salt. Although that was a sales tax, rather than an excise, salt has been subject to excise in some countries, along with many other substances which would, in today's world, seem rather unusual, such as paper, and coffee. In fact, salt was taxed as early as the second century,[12] and as late as the twentieth.[13]

Many different reasons have been given for the taxation of such substances, but have usually – if not explicitly – revolved around the historical scarcity of the substance, and their correspondingly high value at the time; governments clearly felt entitled to a share of the profits that traders made on them.[14]

Window tax was introduced as a form of income tax, that technically preserved the financial privacy of the individual, the rationale being that wealthier individuals would have grander homes, and hence would have more windows. Furthermore, unlike income, windows cannot be easily hidden. Taxes on the same principle include hearth tax, brick tax, and wallpaper tax. Excise is levied at the point of manufacture; in the case of hearth tax, and window tax, their status as excise therefore depends on whether the window/hearth can philosophically be said to truly exist before the hearth/window is installed in the property. Though technically excise, these taxes are really just substitutes for direct taxes, rather than being levied for the usual reasons for excise.

All of these taxes led to avoidance behaviour that had a substantial impact on society and architecture. People deliberately bricked up windows to avoid window tax, used much larger bricks to reduce their liability for brick tax, or bought plain paper and had it filled in later to avoid wallpaper tax. Some poor people even forced themselves to live in cold dark rooms in order to avoid paying these taxes.[15][16] By contrast, extremely wealthy individuals would sometimes parade their ability to pay the tax, as a way of showing off their wealth, by flooding their properties with windows—even to the point of installing fake ones—using fine brickwork, covering their interiors with wallpaper, and having several fireplaces in each room.

Newspapers were taxed in the United Kingdom from 1712 until 1853. The original tax was increased with the Stamps Act 1814, when it was stipulated at 4d per copy. Since this made it extremely expensive for working-class families (doubling the price of a newspaper), 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.[17][18]

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.[19][20]

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".[21]

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 (1997), 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.

Excise taxes in Canada are an important source of revenue for both the federal and provincial government. They are used to raise revenue and discourage Canadian citizens to use or consume harmful goods like alcohol or tobacco. Excise taxes in Canada date back to the 17th century when the French colonial government imposed a tax on fur trading to raise revenue for building infrastructure. Later the British colonialist added taxes on tobacco, alcohol, sugar and tea. Today the types of taxes imposed by the federal government vary but most notable ones could be broken down in these three categories:

• Alcohol Tax: There is an excise tax on beer ($37.01 per hectoliter), wine ($0.731 per liter) and spirits ($13.864 per liter of absolute ethyl alcohol)
• Tobacco Tax: The federal excise tax on cigarettes is $0.79162 per 5 cigarettes. There are also excise duties on tobacco sticks or cigars or even cannabis which is legalized in Canada.
• Fuel Tax: There is a tax for certain petroleum products, fuel inefficient vehicles or even air conditioners. Most importantly tax for fuels like diesel fuel ($0.04 per liter), unleaded gasoline ($0.10) or aviation fuel ($0.04) [22]

However, there are small adjustments to these excise duties that vary from province to province.

Excise taxes in Germany are an important source of government revenue. They are levied on a variety of goods and serve to improve public health, promote environmental protection and fund social programs. The rates of these taxes are often adjusted to ensure they are achieving their goals. In Germany, the following excise is charged:

• energy:
  • gasoline: €0.6545 /l (c. €0.073 /kWh)
  • diesel: €0.4704 /l (c. €0.047 /kWh)
  • LPG: €0.166 /kg (c. €0.0896 /l or €0.0129 /kWh)
  • CNG: €0.1803 /kg (c. €0.0139 /kWh)
  • heating oil: €0.13 /kg (c. €0.0119 /kWh)
• electricity:
  • default: €0.0205 /kWh
  • for trains, trams, etc.: €0.01142 /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: €0.0982 /cigarette + 21.69% of the retail price
  • pipe tobacco: €15.66 /kg + 13.13% of the gross price
  • cigars: €0.014 /cigar + 1.47% of the gross price
• coffee:
  • roasted: €2.19 /kg
  • instant: €4.78 /kg
• beer: c. €0.094 /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

In India, almost all products are subject to excise duty, provided the following four conditions are fulfilled:

• There should be a manufacture
• The manufacture was in India (excluding special economic zone)
• The manufacture should result in goods
• The goods thus manufactured must be excisable (means the goods must be specified in central excise tariff act, 1985)

The excise tax in India is imposed typically on production and manufacturing rather than on sale of goods and services. This means that the taxes are paid by the manufacturer, but it is the consumer who ultimately bears the burden of the tax. India has also incorporated a system which allows companies to pay this tax monthly using the online ACES (Automation of Central Excise and Service Tax) portal. Taxes here are mostly calculated as ad valorem taxes although there are some special cases where rates are applied. The first ever excise taxes were introduced during the British colonial era in mid-19th century to generate revenue by taxing commodities. Then after gaining independence in 1947, it has undergone many changes and today it is using the Goods and Services tax (GST) system introduced in 2017. Excise taxes in India could be broken down into these main categories:

• Basic Excise Duty (BED): This tax is calculated as a percentage of the estimated value of goods, and it is levied on production in India.
• Additional Excise Duty (AED): This tax is also calculated as a percentage of the assessed value and it is levied on products such as tobacco, pan masala or aerated water.
• Special Excise Duty (SED): This tax is levied on goods like alcohol, petroleum products or tobacco and it is also charged as a percentage of the goods value.[23]

There are also a few more categories like Service tax or education cess. However, a lot of these taxes have been subsumed in the Goods and services tax.

In China excise tax is levied both on production and on the sale of a certain goods or services. Excise taxes have been present in China since the Ming and Qing dynasties, but they were only imposed on goods like tea or silk which was considered to more of a luxury goods. In modern China this was largely expanded to excise duties on alcohol, tobacco, petroleum or telecommunication. Examples of Chinas excise taxes would be:

• Alcohol Tax: The taxes for alcohol vary depending on the type of alcohol and its alcohol content.
• Fuel Tax: In China tax on fuels differs for every type of fuel. For instance, the excise tax on gasoline is 1.52 yuan per liter and for diesel is 1.2 yuan per liter.
• Tobacco Tax: The tax on tobacco is actually ad valorem tax meaning that it’s based on the retail price of the item rather than quantity. For example, the tax on cigarettes ranges from 5-56 % depending on the cigarettes type. Other than that, there is also a VAT tax on cigarettes (13 %). This could be explained by the efforts of the Chinese government to reduce smoking and increase public health. [24]

There are many more goods that are subject to excise taxes like cars, other motor vehicles and luxury goods. Excise taxes in general have been heavily criticized for being regressive (disproportionate on lower income citizens) so the government has undertaken steps to better the situation like increasing taxes on luxury cars.

Excise taxes in Japan are a type of consumption taxes that are imposed on certain goods and services at the time of purchase. The main goal of excise taxes in Japan is to discourage people from using harmful products or buying luxury items. Japan has been implementing excise taxes since the mid-19th century when it needed the money for their rapid modernizing and growth. For example, one of the earliest excise taxes on tobacco were imposed in 1898 and this helped to raise funds for the Russo-Japanese war. Today most of the excise taxes in Japan are replaced by the consumption tax. The consumption tax rate is at 10 % since 2019, however it is imposed on variety of products and there are exceptions in the rates for goods like alcohol, tobacco or fuel.[25]

In the United Kingdom, the following forms of excise are levied on goods and services:

• Air Passenger Duty (Finance Act 1994)
• Aggregates Levy (Finance Act 2001)
• Alcohol duties (Beer Duty, Wine Duty, Cider Duty, Spirits Duty) (Alcoholic Liquor Duties Act 1979)
• Bingo Duty (Betting and Gaming Duties Act 1981)
• Climate Change Levy (Finance Act 2000)
• Gambling duties (General Betting Duty, Pool Betting Duty, Remote Gaming Duty) (Finance Act 2014)
• HGV Road User Levy (HGV Road User Levy Act 2013)
• Hydrocarbon Oil Duty (Hydrocarbon Oil Duties Act 1979)
• Landfill tax (Finance Act 1996)
• Machine Games Duty (Finance Act 2012) (formerly Amusement Machine Licence Duty)
• Tobacco Duty (Tobacco Products Duty Act 1979)
• Vehicle Excise Duty (Vehicle Excise and Registration Act 1994)

Historically, these were collected by the Board of Excise, which was subsequently combined with the Inland Revenue (responsible for collecting direct taxes). In view of the higher likelihood of organised crime being involved in attempts at evading Excise, and its association with smuggling, compared with evasion attempts concerning direct taxation, the Board of Excise was later combined instead with the Board of Customs, to form HM Customs and Excise. In this combined form, Customs and Excise was responsible for managing the import and export of goods and services into the UK, and its officers wielded greater powers of access, arrest, and seizure, than the Police.

On 18 April 2005, Customs and Excise was merged once more with the Inland Revenue to form a new department, HM Revenue and Customs (HMRC). The enormous contrast between the powers of officers of the Inland Revenue, and those of Customs and Excise, initially caused several difficulties in the early life of the new organisation. Many of the monitoring and inspection functions, and corresponding powers, were later split off to form a new UK Border Agency, while the residual organisation is now merely responsible for the financial aspects of collection.

In the United States, the term "excise" has at least two meanings: (A) any tax other than a property tax or capitation (i.e., an excise is an indirect tax 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).

An excise (under definition B) has been defined as '"a tax upon manufacture, sale or for a business license or charter, as distinguished from a tax on real property, income or estates."[26]

Both the federal and state governments levy excise taxes on goods such as alcohol, motor fuel, and tobacco products. The laws of the federal government and of some state governments impose excises[27][28] known as the income tax. Even though federal excise taxes are geographically uniform, state excise taxes vary considerably. 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 (4.86 ¢/L) and 24.4 cents per gallon (6.45 ¢/L) for diesel fuel.[29]

In the European Union, harmonisation of excise duties has been considered from the outset. However, the first obstacle was the great heterogeneity of these taxes in the different Member States. Thus, in 1972, excise duties on mineral fuels and oils, alcohol and alcohol derivatives, fermented beverages and manufactured tobacco were harmonised. Due to the differences between countries and the impossibility of reaching an agreement whereby the tax would be fixed and the same for all member countries, it was decided to intervene in excise duties in two ways. The first by establishing a minimum tax rate equal for all member countries and, secondly, by establishing a long-term objective to which all member countries should converge. According to Eurostat data from 2014, it is known that energy taxes represent on average 16% of the implicit rate on consumption and up to 50% of excise tax revenue. Alcohol and tobacco account for only 8% of the implicit rate on consumption. As a whole, excise duties account for around 3% of GDP as a weighted average for the countries that make up the European Union.[30]