# Taxes Upon Consumable Commodities explained — The Wealth of Nations > Chapter companion for The Wealth of Nations by Adam Smith. ## What happens This chapter examines the effects of taxes on consumable commodities, discussing the advantages and disadvantages of different taxation methods, including excise duties and customs. It explores how taxes on luxuries and necessaries impact different social classes, the efficiency of tax collection, and the potential for reform, such as Sir Robert Walpole's excise scheme and Sir Matthew Decker's proposal for licensing consumption. The chapter also addresses the inequality of taxation, the voluntary nature of consumption taxes, and the administrative costs associated with tax collection. ## Themes in this chapter ### Role of Government Explores how government taxation policies affect trade, consumption, and revenue, including the administrative costs and efficiency of different tax systems. ### Social Class and Inequality Analyzes how taxes on luxuries and necessaries fall disproportionately on different social classes, with the poor paying more on basic goods and the rich on luxuries and servants' consumption. ### Free Trade and Market Competition Discusses how tax reforms could free trade in untaxed commodities, reduce prices, and improve competitiveness in foreign markets. ## Character check-ins ### Sir Matthew Decker Proposed a scheme to tax commodities through annual licenses for consumption, aiming to promote foreign trade by eliminating import and export duties. ### Great Britain Discussed in the context of its customs and excise duties, including the administrative costs and revenue from these taxes. ### Holland Mentioned as a country where commodities of immediate consumption are taxed via licenses, such as a head tax for drinking tea. ### Ireland Referenced as a dependent country where absentees derive revenue without contributing to the government, leading to popular proposals for absentee taxes. ## Key lines > If to this saving, which would alone be very considerable, were 1535 added the abolition of all bounties upon the exportation of home-produce; in all cases in which those bounties were not in reality drawbacks of some duties of excise which had before been advanced; it cannot well be doubted but that the neat revenue of customs might, after an alteration of this kind, be fully equal to what it had ever been before. If we also eliminated export bounties that are not refunds of excise duties, the net customs revenue could remain as high as before, while trade and manufacturing would benefit significantly. _Smith argues that reforming customs by removing unnecessary bounties could maintain revenue while freeing trade._ > It was the object of the famous excise scheme of Sir Robert Walpole to establish, with regard to wine and tobacco, a system not very unlike that which is here proposed. But though the bill which was then brought into parliament, comprehended those two commodities only; it was generally supposed to be meant as an introduction to a more extensive scheme of the same kind. Faction, combined with the interest of smuggling merchants, raised so violent, though so unjust, a clamour against that bill, that the minister thought proper to drop it; and from a dread of exciting a clamour of the same kind, none of his successors have dared to resume the project. Walpole's excise scheme for wine and tobacco was similar to Smith's proposal, but opposition from smugglers and political factions forced its abandonment, deterring future attempts. _Smith references Walpole's failed reform to illustrate political obstacles to tax reform._ > The duties upon foreign luxuries imported for home-consumption, though they sometimes fall upon the poor, fall principally upon people of middling or more than middling fortune. Such are, for example, the duties upon foreign wines, upon coffee, chocolate, tea, sugar, etc. The duties upon the cheaper luxuries of home-produce destined for home-consumption, fall pretty equally upon people of all ranks in proportion to their respective expense. Taxes on imported luxuries mainly affect the middle and upper classes, while taxes on domestic luxuries are more evenly distributed across all social ranks based on spending. _Smith distinguishes the incidence of taxes on foreign versus domestic luxuries._ > If a workman can conveniently spare those three halfpence, he buys a pot of porter. If he cannot, he contents himself with a pint, and, as a penny saved is a penny got, he thus gains a farthing by his temperance. He pays the tax piecemeal, as he can afford to pay it, and when he can afford to pay it; and every act of payment is perfectly voluntary, and what he can avoid if he chooses to do so. A worker pays the tax on beer in small amounts each time he buys, allowing him to choose whether to drink based on his budget, making the tax voluntary and convenient. _Smith highlights the advantage of piecemeal taxation on consumables._ ## Links - HTML: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters/taxes-upon-consumable-commodities - Book: https://www.betterreads.online/discover/the_wealth_of_nations_se - All chapters: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters