The government is directly interested in the increase of national wealth, and taxes upon commodities should be allowed to interfere with it as little as possible. On this account, duties upon raw materials are objectionable. They increase the price of such materials, and thus limit the power of the manufacturer to purchase them, and to employ labour in increasing their value, and in adding to the pro duction and capital of the country. They discourage foreign commerce and the employment of shipping ; for as the power of buying is restrained, so also is that of selling, and the interchange of merchan dise between different countries is checked. Moreover, by increasing the price of the exported manufactures, they limit the demand for them abroad and subject them to dangerous competition.
Similar objections may be urged against taxes upon domestic manu factures, since by increasing the price they diminish consumption, and consequently discourage the manufactures, which if left to themselves would have given employment to more capital and labour, and would have added greatly to the amount of national wealth and prosperity. The object of a government should always be to collect its revenue from the results of successful employment of capital and industry, and not to press upon any intermediate stage of production.
The British legislature has of late years very wisely repealed or reduced various duties upon raw materials and upon manufactures. Of customs duties, none now remain but on articles of large con sumption, such as tea, sugar, wine, tobacco, timber, &c., and all those upon raw material, and upon articles of small consumption, where the trouble and hindrance to the merchant exceeded the amount of incomo produced, have been repealed.
One of the chief recommendations of indirect taxes is, that, when placed upon the proper description of articles, the payment of them by the consumer is optional. If charged upon what may be strictly called the necessaries of life, their payment becomes compulsory, and falls with unequal weight upon labour. Competition generally reduces a large proportion of the working classes to a state which allows them little, if anything, beyond necessaries ; consequently a duty upon these, as it will have no effect in diminishing the competition of labour and in raising wages, must reduce the comforts and stint the subsistence of labouring men.
That class of articles commonly called luxuries, of which the con sumption is optional, is a fair subject of taxation. In principle there is no objection to such taxes they do not interfere with industry or production, but are paid out of the incomes of the contributors, and paid willingly, and for the most part without undue pressure upon their means. But in laying on taxes upon particular articles of this description, care must be taken to proportion the charge to the value of the article. Excessive duties fail in the very object they have iu view, by rendering the revenue less productive than moderate duties; while the causes of their failure are injurious to the wealth of the country by discouraging consumption, and to its morals by offering an inducement to smuggliug.
High duties upon foreign articles imported into a country are liable to all the objections which apply to immoderate taxes upon articles of consumption, and they are chargeable with another—they diminish importation, and thereby restrict commercial intercourse and the demand for and exportation of domestic produce and manufactures.
The success of moderate duties upon articles of consumption, iu encouraging the use of them, placing them within the reach of a larger number of persons, and at the same time augmenting the fevenue, was never better shown than in the article of coffee. In 1824 the duty on
British plantation coffee was 18., upon East India 18. 6d., and upon foreign coffee 2s. 6d. per lb., and the quantity cleared consumption was 8,262,943 lbs., producing a net revenue of 420,9881. In 1825 those duties were reduced one-half, and the consequence was consider ably more than a threefold increase in the consumption, while the revenue in 1841 had been more than doubled. The duty is now 3d. per lb., and the importation in 1859 was 65,353,029 lbs., of which 34,292,947 lbs. were entered for home consumption. There is .zo difference between foreign coffee and that of the production of British possessions.
Thus reductions of existing duties may be proved by such examples to increase the revenue ; but whether the effect of them be immediate or deferred must depend upon a variety of circumstances. If the reduction puts an end to extensive smuggling, the revenue will derive immediate benefit, as both the demand and the supply of the article already exist; and the reduced tax, without affecting production or consumption, acts as a police regulation, and at once protects the revenue from fraud. But where there is little or no smuggling, and the revenue can only be increased by means of additional consumption, the effect of reduced duties may be deferred and even remote. The article may have to be produced ; capital, skill, labour, and time may be required to provide it in sufficient quantities to meet the growing demands of the consumer ; and even should the supply become abundant, the habits and tastes of a people cannot be changed on a sudden. The high price of an article may have placed it out of their reach, and in the meanwhile they may have become attached to a favourite substitute, or may be slow to spend their money upon a commodity which they have learned to do without. These and other causes may defer for a considerable time such an increase of con sumption as would make up for the reduced rate of tax, especially when the reduction has been so great as to require an extraordinary addition to the previous amount of consumption, before the sacrifice made in the revenue can be redeemed. But where the article on which it is proposed to reduce a tax is already in universal request, and the supply immediate and abundant, and where the tax is so heavy as to restrain consumption, no present loss need be apprehended from a remission of part of the tax, and a very speedy increase of revenue may be expected. Sugar is an article of this description. It has become a necessary of life as well as a favourite luxury. There are scarcely any limits to the supply that could be raised, and the present duties add materially to the price and check consumption. As a proof of the suddenness with which the consumption of foreign sugar might be expected to increase if the excessive duty were reduced, we may refer to the effects of equalising the duties on East and West India sugars in 1836. In that year the duty on East India sugar was redneed from 32s. the cwt. to 24s. In '1835 the quantity imported bad been 147,976 civta. ' • and in '1837, one year only after the change, the import had increases! to 302,945 cvsta.; in 1838, to 474,100 ewts. ; and in '1839, to 537,142 cats. As the tax was diminished only by one fourth, and the consumption was immediately more than doubled, the revenue at once gained considerably by the reduction of duty. The duty now varies from 18s. 4d. to 12s. 6d. per cwt., according to the quality. and the importation in '1859 was 7,426,791 cwta. ' • the quantity retained for home consumption was 8,847,119, on which the duty was 7,291,039/., and the estimated value 12,516,7571.