Excise, the name of a tax on commodities, from the Latin excisus, 'cut off,' as being a portion of the value of the commodity cut off and set apart for the revenue before the commodity is sold. This is not its actual nature, however, for the manufacturer who looks to a profit on his product does not give part of the value to the revenue; he merely counts the tax as part of his expenditure, or, in other words, includes it in the price, the tax being really paid by the consumer. An inland tax on commodities sold and bought for consumption in the country is a very ancient one, but it has generally appeared in the simple shape of a toll or octroi on goods brought to market. The complicated arrangement for officially watching the process of a manufacture, for the purpose of seeing that none of the dues of the revenue are evaded, is of comparatively modern origin. It was first introduced into England, upon the Dutch model, by the Long Parliament, which established an excise on liquors in 1643, and in subsequent years on articles of food, salt, silk and stuffs, and other commodities in general use. Though unpopular, the excise in some form or other has ever since continued to be a material element in the taxation and revenue of Britain. In the earlier part of the 18th century Sir Robert Walpole entertained the notion of enlarging its productiveness, while mitigating its proportional pressure by the bonding system, which suspends the exaction of the duty until the goods are sold, and thus leaves the manufacturer with all his capital to be devoted to production (see BONDED WAREHOUSES). But the rumour of an enlargement of the unpopular excise duty created a general excitement, and the memorable cry of 'Liberty, Property, and No Excise,' compelled Walpole to abandon his project.
An excise, when compared with other taxes, has its good and its bad features. It is a method of extracting money for national purposes from personal expenditure on luxuries, and is especially serviceable when received from those luxuries the use of which in excess becomes a vice. On the other hand, it renders necessary a system of inquisitorial inspection not very agreeable to a free people, and open to abuse and fraud; while at the same time excessively high duties, and duties on commodities strictly of domestic manufacture, lead to smuggling and all its demoralising consequences. The evils of an excise were formerly aggravated by the practice of farming the duties—i.e. by letting them to the highest bidder, whose interest it became, like any other contractor, to make the greatest possible profit by his speculation, and consequently to exact the duties in the most rigorous manner. In every well-regulated revenue system it is, of course, only fair to all parties that the duty, as the law lays it on, should be fully exacted; but in the age of farming the arrangements were all slovenly, and there was much latitude of power in the hands of the farmers. The farming system became very oppressive in France, especially in the gabelle or excise on that necessary of life, salt. It is a curious fact, however, that when the farming of the excise was abolished in Scotland by the Union the people grumbled, saying they were easier under the farmers, their own neighbours, who acted on the principle of 'live and let live,' than under the officers sent down from England, who rigorously collected the impost.
An excise works most easily when it is laid on some commodity manufactured on a large scale. In a great distillery the excise officer is almost a portion of the establishment; he has an eye on every step of the process, with the object of seeing that the commodity does not get into the market without government obtaining its proper share—sometimes far the greater part—of the market price. The social influence of such an arrangement is very different from that of the old candle and salt duties, which made it the function of the exciseman to pounce on a farmer melting the surplus tallow of the last killed sheep, or on a fisherman boiling sea-water to procure salt for his potatoes. The manufacturer, however, though he has the benefit of the bonding system, feels the excise regulations to be a considerable drag and hindrance in his operations, since there are numerous minute operations which he cannot perform without sending special notice to the excise department, or having an officer actually present. This renders it necessary, too, that all the steps of the process should not merely be defined as between the manufacturer and the officer, but should be set forth in an act of parliament; and hence deviations for the purpose of economy, or by way of experiment, become difficult, and sometimes impracticable. As difficulties with which the pro- ducer has to contend, these things require him to lay on the selling price of the commodity a larger addition than the actual amount of the duty. This objection, however, is less potent than it formerly was, for the introduction of machines and special apparatus, such as alcoholometers, saccharometers, &c., has greatly facilitated the collection of excise duties.
No method of taxation requires a nicer adjustment to the social condition of a country than an excise. While it is now admitted that necessaries of life should be free, yet some form of tax upon consumption is the only method by which certain classes of the people can be made to contribute their share to the revenue of the country. But for the excise and customs dues on beer, spirits, and tobacco, and some licenses, many persons would evade all share in the national burden. In England, in the year 1746, a duty of 20s. a gallon was laid on spirits, with the view of suppressing the vice of drunkenness, which, however, it greatly increased, for the law became a dead letter, and the smuggler fully supplied the market, although within the two years in which the law was in force no fewer than 12,000 persons were convicted of offences against the act. In Scotland, the duty, which was 5s. 6d. a gallon, had to be reduced in 1823 to 2s., on account of the prevalence of smuggling—half the consumption of the country, in fact, paying no duty. The duty has since then been gradually raised, until it now amounts to 10s. a gallon, forming a large source of revenue. The productiveness of the spirit duty, and a better understanding of the true principles of taxation, has led to the gradual removal of many excise duties, as, for instance, on salt, candles, leather, glass, soap, paper, &c. The malt-tax was transferred to beer in 1880.
In 1849 the excise department was amalgamated with that of stamps and taxes to form the Board of Inland Revenue; and many changes have been made, both as to the articles taxable and in the organisation of the excise system. The only items on which excise duties are now charged are spirits, beer, tobacco, chicory, and the passenger receipts of railway companies. But various taxes of the nature of license-duties for following particular pursuits are collected in the excise department; also several items chargeable before 1869 as assessed taxes. License-duties must be taken out yearly by auctioneers, appraisers, brewers, maltsters, distillers, makers of vinegar, victuallers, sellers of beer, spirits, and wine, sellers of playing-cards if also makers, hawkers, pedlars, horse-dealers, house-agents, tobacconists, pawnbrokers, dealers in sweets, and dealers in patent medicines. Game-licenses, gun-licenses, and licenses for male-servants, horses, dogs, carriages, and the use of armorial bearings come under the same department. The whole excise revenue of the United Kingdom in the fiscal year ending 31st March 1858 was £17,901,545; 1868, £20,190,338; 1878, £27,710,514; and 1888, £25,620,000, when the cost of collecting it was £1,771,785. The principal items of the receipts in the last-named year were: Beer, £8,711,532; spirits, £13,028,204; railway passengers' duty, £314,933; and licenses. Among the latter the chief contributors were beer and wine dealers, £186,574; dog-licenses, £354,278; carriages, £549,525; armorial bearings, £74,526; male-servants, £136,287; game, £179,143; gold and silver plate, £47,919; gun, £86,317; pawnbrokers, £35,722; hawkers and pedlars, £26,942; brewers, £19,280; auctioneers and appraisers, £79,300; spirits (distillers), £4242, (dealers), £121,194; publicans and grocers licensed to sell liquor, £1,485,936; tobacco, £84,855; wine and sweets, £67,366. The amount of excise duties in 1894 was £25,246,861, and in 1895, £25,875,626—made up in the last-named year by spirit duties, £15,269,296; beer duties, £10,102,050; licenses, £236,086; chicory duty, £1523; coffee mixture labels, £2101; railways, £260,694; and charges on delivery from bonded warehouses, &c., £3876. These totals do not now include the licenses on carriages, male servants, armorial bearings, and dogs, which, with gun and game licenses, have been surrendered to the department of local taxation. According to the present organisation of the excise department, the United Kingdom is divided into collections, each under a collector; the collections are subdivided into districts, each under a supervisor; and these into divisions, each under division-officers and ride-officers. The efficiency with which these officials discharge their duties secures a very complete payment of taxes, and their manner of dealing with the tax-payers leaves a minimum of just ground for complaint. The old feeling of objection to the excise as a 'foreign system' has completely worn away, and the tax is now probably as popular as any impost is ever likely to be. To put it otherwise, the excise is not disliked so much as the income-tax. See the articles BEER, WHISKY, &c.
In the United States, the word excise is not officially used, the corresponding title being 'internal revenue.' This is raised mainly from whisky, tobacco, and malt liquors; other items being the tax on banks and bankers, and on oleo-margarine. Stamps ceased to be a source of revenue after 1883. The total internal revenue of the United States was 309,226,813 in 1866, 116,700,723 in 1876, 116,805,936 in 1886, 118,823,391 in 1887, 124,296,872 in 1888; while for 1890-91 the total was 145,686,250, and for 1892-93, $147,111,233.