Chapter LXV: Appendix: TO ARTICLES I. AND II.—Taxes upon the Capital Value of (3)

In consequence of the notion, that duties upon consumable goods were taxes
upon the profits of merchants, those duties have, in some countries, been
repeated upon every successive sale of the goods. If the profits of the
merchant-importer or merchant-manufacturer were taxed, equality seemed to
require that those of all the middle buyers, who intervened between either
of them and the consumer, should likewise be taxed. The famous alcavala of
Spain seems to have been established upon this principle. It was at first
a tax of ten per cent. afterwards of fourteen per cent. and it is at
present only six per cent. upon the sale of every sort of property whether
moveable or immoveable; and it is repeated every time the property is
sold. {Memoires concernant les Droits, etc. tom. i, p. 15} The levying of
this tax requires a multitude of revenue officers, sufficient to guard the
transportation of goods, not only from one province to another, but from
one shop to another. It subjects, not only the dealers in some sorts of
goods, but those in all sorts, every farmer, every manufacturer, every
merchant and shopkeeper, to the continual visit and examination of the
tax-gatherers. Through the greater part of the country in which a tax of
this kind is established, nothing can be produced for distant sale. The
produce of every part of the country must be proportioned to the
consumption of the neighbourhood. It is to the alcavala, accordingly, that
Ustaritz imputes the ruin of the manufactures of Spain. He might have
imputed to it, likewise, the declension of agriculture, it being imposed
not only upon manufactures, but upon the rude produce of the land.

In the kingdom of Naples, there is a similar tax of three per cent. upon
the value of all contracts, and consequently upon that of all contracts of
sale. It is both lighter than the Spanish tax, and the greater part of
towns and parishes are allowed to pay a composition in lieu of it. They
levy this composition in what manner they please, generally in a way that
gives no interruption to the interior commerce of the place. The
Neapolitan tax, therefore, is not near so ruinous as the Spanish one.

The uniform system of taxation, which, with a few exception of no great
consequence, takes place in all the different parts of the united kingdom
of Great Britain, leaves the interior commerce of the country, the inland
and coasting trade, almost entirely free. The inland trade is almost
perfectly free; and the greater part of goods may be carried from one end
of the kingdom to the other, without requiring any permit or let-pass,
without being subject to question, visit or examination, from the revenue
officers. There are a few exceptions, but they are such as can give no
interruption to any important branch of inland commerce of the country.
Goods carried coastwise, indeed, require certificates or coast-cockets. If
you except coals, however, the rest are almost all duty-free. This freedom
of interior commerce, the effect of the uniformity of the system of
taxation, is perhaps one of the principal causes of the prosperity of
Great Britain; every great country being necessarily the best and most
extensive market for the greater part of the productions of its own
industry. If the same freedom in consequence of the same uniformity, could
be extended to Ireland and the plantations, both the grandeur of the
state, and the prosperity of every part of the empire, would probably be
still greater than at present.

In France, the different revenue laws which take place in the different
provinces, require a multitude of revenue officers to surround, not only
the frontiers of the kingdom, but those of almost each particular
province, in order either to prevent the importation of certain goods, or
to subject it to the payment of certain duties, to the no small
interruption of the interior commerce of the country. Some provinces are
allowed to compound for the gabelle, or salt tax; others are exempted from
it altogether. Some provinces are exempted from the exclusive sale of
tobacco, which the farmers-general enjoy through the greater part of the
kingdom. The aides, which correspond to the excise in England, are very
different in different provinces. Some provinces are exempted from them,
and pay a composition or equivalent. In those in which they take place,
and are in farm, there are many local duties which do not extend beyond a
particular town or district. The traites, which correspond to our customs,
divide the kingdom into three great parts; first, the provinces subject to
the tariff of 1664, which are called the provinces of the five great
farms, and under which are comprehended Picardy, Normandy, and the greater
part of the interior provinces of the kingdom; secondly, the provinces
subject to the tariff of 1667, which are called the provinces reckoned
foreign, and under which are comprehended the greater part of the frontier
provinces; and, thirdly, those provinces which are said to be treated as
foreign, or which, because they are allowed a free commerce with foreign
countries, are, in their commerce with the other provinces of France,
subjected to the same duties as other foreign countries. These are Alsace,
the three bishoprics of Mentz, Toul, and Verdun, and the three cities of
Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great
farms (called so on account of an ancient division of the duties of
customs into five great branches, each of which was originally the subject
of a particular farm, though they are now all united into one), and in
those which are said to be reckoned foreign, there are many local duties
which do not extend beyond a particular town or district. There are some
such even in the provinces which are said to be treated as foreign,
particularly in the city of Marseilles. It is unnecessary to observe how
much both the restraints upon the interior commerce of the country, and
the number of the revenue officers, must be multiplied, in order to guard
the frontiers of those different provinces and districts which are subject
to such different systems of taxation.

Over and above the general restraints arising from this complicated system
of revenue laws, the commerce of wine (after corn, perhaps, the most
important production of France) is, in the greater part of the provinces,
subject to particular restraints arising from the favour which has been
shown to the vineyards of particular provinces and districts above those
of others. The provinces most famous for their wines, it will be found, I
believe, are those in which the trade in that article is subject to the
fewest restraints of this kind. The extensive market which such provinces
enjoy, encourages good management both in the cultivation of their
vineyards, and in the subsequent preparation of their wines.

Such various and complicated revenue laws are not peculiar to France. The
little duchy of Milan is divided into six provinces, in each of which
there is a different system of taxation, with regard to several different
sorts of consumable goods. The still smaller territories of the duke of
Parma are divided into three or four, each of which has, in the same
manner, a system of its own. Under such absurd management, nothing but the
great fertility of the soil, and happiness of the climate, could preserve
such countries from soon relapsing into the lowest state of poverty and
barbarism.

Taxes upon consumable commodities may either be levied by an
administration, of which the officers are appointed by govermnent, and are
immediately accountable to government, of which the revenue must, in this
case, vary from year to year, according to the occasional variations in
the produce of the tax; or they may be let in farm for a rent certain, the
farmer being allowed to appoint his own officers, who, though obliged to
levy the tax in the manner directed by the law, are under his immediate
inspection, and are immediately accountable to him. The best and most
frugal way of levying a tax can never be by farm. Over and above what is
necessary for paying the stipulated rent, the salaries of the officers,
and the whole expense of administration, the farmer must always draw from
the produce of the tax a certain profit, proportioned at least to the
advance which he makes, to the risk which he runs, to the trouble which he
is at, and to the knowledge and skill which it requires to manage so very
complicated a concern. Government, by establishing an administration under
their own immediate inspection, of the same kind with that which the
farmer establishes, might at least save this profit, which is almost
always exorbitant. To farm any considerable branch of the public revenue
requires either a great capital, or a great credit; circumstances which
would alone restrain the competition for such an undertaking to a very
small number of people. Of the few who have this capital or credit, a
still smaller number have the necessary knowledge or experience; another
circumstance which restrains the competition still further. The very few
who are in condition to become competitors, find it more for their
interest to combine together; to become copartners, instead of
competitors; and, when the farm is set up to auction, to offer no rent but
what is much below the real value. In countries where the public revenues
are in farm, the farmers are generally the most opulent people. Their
wealth would alone excite the public indignation; and the vanity which
almost always accompanies such upstart fortunes, the foolish ostentation
with which they commonly display that wealth, excite that indignation
still more.

The farmers of the public revenue never find the laws too severe, which
punish any attempt to evade the payment of a tax. They have no bowels for
the contributors, who are not their subjects, and whose universal
bankruptcy, if it should happen the day after the farm is expired, would
not much affect their interest. In the greatest exigencies of the state,
when the anxiety of the sovereign for the exact payment of his revenue is
necessarily the greatest, they seldom fail to complain, that without laws
more rigorous than those which actually took place, it will be impossible
for them to pay even the usual rent. In those moments of public distress,
their commands cannot be disputed. The revenue laws, therefore, become
gradually more and more severe. The most sanguinary are always to be found
in countries where the greater part of the public revenue is in farm; the
mildest, in countries where it is levied under the immediate inspection of
the sovereign. Even a bad sovereign feels more compassion for his people
than can ever be expected from the farmers of his revenue. He knows that
the permanent grandeur of his family depends upon the prosperity of his
people, and he will never knowingly ruin that prosperity for the sake of
any momentary interest of his own. It is otherwise with the farmers of his
revenue, whose grandeur may frequently be the effect of the ruin, and not
of the prosperity, of his people.

A tax is sometimes not only farmed for a certain rent, but the farmer has,
besides, the monopoly of the commodity taxed. In France, the duties upon
tobacco and salt are levied in this manner. In such cases, the farmer,
instead of one, levies two exorbitant profits upon the people; the profit
of the farmer, and the still more exorbitant one of the monopolist.
Tobacco being a luxury, every man is allowed to buy or not to buy as he
chuses; but salt being a necessary, every man is obliged to buy of the
farmer a certain quantity of it; because, if he did not buy this quantity
of the farmer, he would, it is presumed, buy it of some smuggler. The
taxes upon both commodities are exorbitant. The temptation to smuggle,
consequently, is to many people irresistible; while, at the same time, the
rigour of the law, and the vigilance of the farmer’s officers, render the
yielding to the temptation almost certainly ruinous. The smuggling of salt
and tobacco sends every year several hundred people to the galleys,
besides a very considerable number whom it sends to the gibbet. Those
taxes, levied in this manner, yield a very considerable revenue to
government. In 1767, the farm of tobacco was let for twenty-two millions
five hundred and forty-one thousand two hundred and seventy-eight livres
a-year; that of salt for thirty-six millions four hundred and ninety-two
thousand four hundred and four livres. The farm, in both cases, was to
commence in 1768, and to last for six years. Those who consider the blood
of the people as nothing, in comparison with the revenue of the prince,
may, perhaps, approve of this method of levying taxes. Similar taxes and
monopolies of salt and tobacco have been established in many other
countries, particularly in the Austrian and Prussian dominions, and in the
greater part of the states of Italy.

In France, the greater part of the actual revenue of the crown is derived
from eight different sources; the taille, the capitation, the two
vingtiemes, the gabelles, the aides, the traites, the domaine, and the
farm of tobacco. The five last are, in the greater part of the provinces,
under farm. The three first are everywhere levied by an administration,
under the immediate inspection and direction of government; and it is
universally acknowledged, that in proportion to what they take out of the
pockets of the people, they bring more into the treasury of the prince
than the other five, of which the administration is much more wasteful and
expensive.

The finances of France seem, in their present state, to admit of three
very obvious reformations. First, by abolishing the taille and the
capitation, and by increasing the number of the vingtiemes, so as to
produce an additional revenue equal to the amount of those other taxes,
the revenue of the crown might be preserved; the expense of collection
might be much diminished; the vexation of the inferior ranks of people,
which the taille and capitation occasion, might be entirely prevented; and
the superior ranks might not be more burdened than the greater part of
them are at present. The vingtieme, I have already observed, is a tax very
nearly of the same kind with what is called the land tax of England. The
burden of the taille, it is acknowledged, falls finally upon the
proprietors of land; and as the greater part of the capitation is assessed
upon those who are subject to the taille, at so much a-pound of that other
tax, the final payment of the greater part of it must likewise fall upon
the same order of people. Though the number of the vingtiemes, therefore,
was increased, so as to produce an additional revenue equal to the amount
of both those taxes, the superior ranks of people might not be more
burdened than they are at present; many individuals, no doubt, would, on
account of the great inequalities with which the taille is commonly
assessed upon the estates and tenants of different individuals. The
interest and opposition of such favoured subjects, are the obstacles most
likely to prevent this, or any other reformation of the same kind.
Secondly, by rendering the gabelle, the aides, the traites, the taxes upon
tobacco, all the different customs and excises, uniform in all the
different parts of the kingdom, those taxes might be levied at much less
expense, and the interior commerce of the kingdom might be rendered as
free as that of England. Thirdly, and lastly, by subjecting all those
taxes to an administration under the immediate inspection and direction or
government, the exorbitant profits of the farmers-general might be added
to the revenue of the state. The opposition arising from the private
interest of individuals, is likely to be as effectual for preventing the
two last as the first-mentioned scheme of reformation.

The French system of taxation seems, in every respect, inferior to the
British. In Great Britain, ten millions sterling are annually levied upon
less than eight millions of people, without its being possible to say that
any particular order is oppressed. From the Collections of the Abbé
Expilly, and the observations of the author of the Essay upon the
Legislation and Commerce of Corn, it appears probable that France,
including the provinces of Lorraine and Bar, contains about twenty-three
or twenty-four millions of people; three times the number, perhaps,
contained in Great Britain. The soil and climate of France are better than
those of Great Britain. The country has been much longer in a state of
improvement and cultivation, and is, upon that account, better stocked
with all those things which it requires a long time to raise up and
accumulate; such as great towns, and convenient and well-built houses,
both in town and country. With these advantages, it might be expected,
that in France a revenue of thirty millions might be levied for the
support of the state, with as little inconvenience as a revenue of ten
millions is in Great Britain. In 1765 and 1766, the whole revenue paid
into the treasury of France, according to the best, though, I acknowledge,
very imperfect accounts which I could get of it, usually run between 308
and 325 millions of livres; that is, it did not amount to fifteen millions
sterling; not the half of what might have been expected, had the people
contributed in the same proportion to their numbers as the people of Great
Britain. The people of France, however, it is generally acknowledged, are
much more oppressed by taxes than the people of Great Britain. France,
however, is certainly the great empire in Europe, which, after that of
Great Britain, enjoys the mildest and most indulgent government.

In Holland, the heavy taxes upon the necessaries of life have ruined, it
is said, their principal manufacturers, and are likely to discourage,
gradually, even their fisheries and their trade in ship-building. The
taxes upon the necessaries of life are inconsiderable in Great Britain,
and no manufacture has hitherto been ruined by them. The British taxes
which bear hardest on manufactures, are some duties upon the importation
of raw materials, particularly upon that of raw silk. The revenue of the
States-General and of the different cities, however, is said to amount to
more than five millions two hundred and fifty thousand pounds sterling;
and as the inhabitants of the United Provinces cannot well be supposed to
amount to more than a third part of those of Great Britain, they must, in
proportion to their number, be much more heavily taxed.

After all the proper subjects of taxation have been exhausted, if the
exigencies of the state still continue to require new taxes, they must be
imposed upon improper ones. The taxes upon the necessaries of life,
therefore, may be no impeachment of the wisdom of that republic, which, in
order to acquire and to maintain its independency, has, in spite of its
great frugality, been involved in such expensive wars as have obliged it to
contract great debts. The singular countries of Holland and Zealand,
besides, require a considerable expense even to preserve their existence,
or to prevent their being swallowed up by the sea, which must have
contributed to increase considerably the load of taxes in those two
provinces. The republican form of government seems to be the principal
support of the present grandeur of Holland. The owners of great capitals,
the great mercantile families, have generally either some direct share, or
some indirect influence, in the administration of that government. For the
sake of the respect and authority which they derive from this situation,
they are willing to live in a country where their capital, if they employ
it themselves, will bring them less profit, and if they lend it to
another, less interest; and where the very moderate revenue which they can
draw from it will purchase less of the necessaries and conveniencies of
life than in any other part of Europe. The residence of such wealthy
people necessarily keeps alive, in spite of all disadvantages, a certain
degree of industry in the country. Any public calamity which should
destroy the republican form of government, which should throw the whole
administration into the hands of nobles and of soldiers, which should
annihilate altogether the importance of those wealthy merchants, would
soon render it disagreeable to them to live in a country where they were
no longer likely to be much respected. They would remove both their
residence and their capital to some other country, and the industry and
commerce of Holland would soon follow the capitals which supported them.