Commutation Act 1784: Difference between revisions
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The implementation of the Act drastically reduced the tea tax, which wiped out the profit margins of smuggling activities. The Act also regulated the role of the East India Company in the tea trade, that is, as the sole importer of tea from China to Britain and the organizer of the auction in London. In William Pitt's prediction, the fiscal losses from lower custom and excise duties should be offset or even surpassed by tax revenue from rapidly growing and ultimately steady legal domestic sales. The government's determination to strengthen the development of its tea trading, both internationally and domestically, could be seen from the terms of the act. The Company was required | The implementation of the Act drastically reduced the tea tax, which wiped out the profit margins of smuggling activities. The Act also regulated the role of the East India Company in the tea trade, that is, as the sole importer of tea from China to Britain and the organizer of the auction in London. In William Pitt's prediction, the fiscal losses from lower custom and excise duties should be offset or even surpassed by tax revenue from rapidly growing and ultimately steady legal domestic sales. The government's determination to strengthen the development of its tea trading, both internationally and domestically, could be seen from the terms of the act. The Company was required | ||
(1) to import sufficient tea to supply the domestic market, (2) to maintain in its warehouses a quantity equal to one year’s consumption, (3) to hold public sales by auction four times a year ‘at equal distance of time’ [ | (1) to import sufficient tea to supply the domestic market, (2) to maintain in its warehouses a quantity equal to one year’s consumption, (3) to hold public sales by auction four times a year ‘at equal distance of time’ [§5 of the Act], (4) to put up tea for sale at prices which should not exceed the prime cost, the freight and charges of importation, the lawful interest of capital from the time of the arrival of such tea in Britain, and the common premium of insurance, and (5) to sell such tea ‘without reserve to the highest bidder, provided an advance of one penny per pound should be bid upon the [put-up] prices’ [§5 of the Act].<ref>Hoh-Cheung; Mui, Lorna H. ''The Commutation Act and the Tea Trade in Britain 1784–1793''. The Economic History Review. New Series, Vol. 16, No. 2 (1963), pp.234.</ref> | ||
In the 10 years before the Act was passed, the tea imported into Britain by the Company was about 54,506,144lbs, while in the last decade of the 18th century, this figure more than quadrupled to 228,826,616lbs | In the 10 years before the Act was passed, the tea imported into Britain by the Company was about 54,506,144lbs, while in the last decade of the 18th century, this figure more than quadrupled to 228,826,616lbs.<ref>Roy Moxham: Tea: ''Addiction, Exploitation, and Empire''. New York: Carroll & Graf Publishers, 2003, p.28.</ref> The company's European competitors were largely driven out of the British market. During these periods, their tea imports from China shrunk from 134,698,900lbs to 38,506,646lbs.<ref>Roy Moxham: Tea: ''Addiction, Exploitation, and Empire''. New York: Carroll & Graf Publishers, 2003, p.28.</ref> | ||
It is worth noting that after the enforcement of the Act, the domestic tea sales channels in the UK were in the hands of domestic legal distributors, especially principal distributors, such as Richard Twining who proposed to Pitt to reduce taxes on tea. | It is worth noting that after the enforcement of the Act, the domestic tea sales channels in the UK were in the hands of domestic legal distributors, especially principal distributors, such as Richard Twining who proposed to Pitt to reduce taxes on tea. | ||
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Moxham, Roy. ''Tea: Addiction, Exploitation, and Empire''. Carroll & Graf, 2003. | Moxham, Roy. ''Tea: Addiction, Exploitation, and Empire''. Carroll & Graf, 2003. | ||
'''References''' | |||
Revision as of 17:05, 5 July 2023
Statute passed by the British Parliament under William Pitt the Younger, Prime Minister since 1783. On the advice of the major London tea dealers, Pitt introduced the Act to reduce custom and excise duties on tea from 119 to 12.5 per cent. Consequently, tea smuggling almost disappeared in a very short time. On the other hand, the Act aimed to establish the absolute monopoly of the East India Company in the international trade of tea.
1. Historical Background
Catherine of Braganza, as a tea addict, brought tea-drinking culture to the British court in the mid-17th century. But the high tax restricted tea consumption to the wealthy. At the end of the 17th century, the retail price of tea was about ￡1 per lb. At that time, the highest weekly income of a skilled craftsman was only ￡1, and that of the average labourer only about 40p.[1]
The pursuit of tea by the British was phenomenal in the 18th century. By the mid-18th century the consumption of tea had gradually expanded to different classes of the country. Recorded imports into the British market rose from 13,082lbs in 1699 to 4,727,992lbs in 1750.[2] The officially imported tea still could not meet the market demand. With insufficient supply and huge profit margins, tea smuggling became rampant. It has been estimated that the annual consumption of illicit tea in Britain up to the 1770s was equal to or even higher than that of legal tea.[3] Skillful tactics of the smugglers, the involvement of local townspeople and the violence of the notorious smuggling gangs, such as the Hawkhurst Gang, had heightened the difficulty of various parliamentary efforts to ban smuggling. The situation in which government revenue was severely affected did not change until Pitt came to power.
2. Content of the Act and Major Consequences
The implementation of the Act drastically reduced the tea tax, which wiped out the profit margins of smuggling activities. The Act also regulated the role of the East India Company in the tea trade, that is, as the sole importer of tea from China to Britain and the organizer of the auction in London. In William Pitt's prediction, the fiscal losses from lower custom and excise duties should be offset or even surpassed by tax revenue from rapidly growing and ultimately steady legal domestic sales. The government's determination to strengthen the development of its tea trading, both internationally and domestically, could be seen from the terms of the act. The Company was required
(1) to import sufficient tea to supply the domestic market, (2) to maintain in its warehouses a quantity equal to one year’s consumption, (3) to hold public sales by auction four times a year ‘at equal distance of time’ [§5 of the Act], (4) to put up tea for sale at prices which should not exceed the prime cost, the freight and charges of importation, the lawful interest of capital from the time of the arrival of such tea in Britain, and the common premium of insurance, and (5) to sell such tea ‘without reserve to the highest bidder, provided an advance of one penny per pound should be bid upon the [put-up] prices’ [§5 of the Act].[4]
In the 10 years before the Act was passed, the tea imported into Britain by the Company was about 54,506,144lbs, while in the last decade of the 18th century, this figure more than quadrupled to 228,826,616lbs.[5] The company's European competitors were largely driven out of the British market. During these periods, their tea imports from China shrunk from 134,698,900lbs to 38,506,646lbs.[6]
It is worth noting that after the enforcement of the Act, the domestic tea sales channels in the UK were in the hands of domestic legal distributors, especially principal distributors, such as Richard Twining who proposed to Pitt to reduce taxes on tea.
Works Cited
Hoh-Cheung; Mui, Lorna H. "The Commutation Act and the Tea Trade in Britain 1784–1793". The Economic History Review. New Series, Vol. 16, No. 2 (1963), pp.234–253. jstor.org/stable/2598638 [Access June 2. 2023]
Moxham, Roy. Tea: Addiction, Exploitation, and Empire. Carroll & Graf, 2003.
References
- ↑ Roy Moxham: Tea: Addiction, Exploitation, and Empire. New York: Carroll & Graf Publishers, 2003, p.22.
- ↑ Roy Moxham: Tea: Addiction, Exploitation, and Empire. New York: Carroll & Graf Publishers, 2003, p.24.
- ↑ Roy Moxham: Tea: Addiction, Exploitation, and Empire. New York: Carroll & Graf Publishers, 2003, p.26.
- ↑ Hoh-Cheung; Mui, Lorna H. The Commutation Act and the Tea Trade in Britain 1784–1793. The Economic History Review. New Series, Vol. 16, No. 2 (1963), pp.234.
- ↑ Roy Moxham: Tea: Addiction, Exploitation, and Empire. New York: Carroll & Graf Publishers, 2003, p.28.
- ↑ Roy Moxham: Tea: Addiction, Exploitation, and Empire. New York: Carroll & Graf Publishers, 2003, p.28.