excise, taxes, and distillation. Excise duty or tax on consumer goods is usually paid by the manufacturer or, with some exceptions, the retailer. “Excise” originates from the Dutch excijs, from the Latin, accensum, to tax. The Dutch in Amsterdam were the first in Europe to also levy a customs duty on imported spirits, in 1498. As with most excise taxes, this was calculated according to the strength of the spirit. Other taxes can also be levied on spirits, from tariffs and ad valorem duty to regional and even district sales taxes under different countries’ jurisdictions. There are also licensing fees and duties on raw materials, manufacturing, and retailing. Spirits have traditionally been the most heavily regulated and taxed category of consumer goods, due to the revenue they generate and the way taxation can directly influence the public’s consumption behavior. These taxes directly affect the economics of the spirits business at every level, from product portfolios to production output, the construction and layout of distillery premises, size and type of stills, bond warehousing, and even the time and place for purchase and consumption.
The first known excise system comes from Song dynasty China, which established “alcohol and vinegar bureaus” in northern China in 1231–1232 ce. This was intended as a state monopoly on the manufacture and sale of spirits, but when that proved unworkable, it incorporated a complex series of controls and taxes on private production. A modified system continued when the Song yielded to the Yuan dynasty in 1271.
In the West, the most elaborate and influential excise system was created by Britain, beginning in the seventeenth century, and we shall focus on that. Excise and customs on alcoholic products were a primary source of income for Britain and the English-speaking world until the mid-twentieth century, led by the United States, Scotland, Canada, Ireland, and Australia. The commencement of excise and most of the major duty rate increases were introduced to fund military campaigns, a relationship with a long historical nexus. In the United Kingdom, the first excise law was enacted to fund the English Civil War (1642–1651). Every significant duty increase and most revenue-raising regulations had motivations in funding further military expenditures: War of Grand Alliances (1689–1697), Seven Years War (1756–1763), Napoleonic Wars (1803–1815), and Crimean War (1853–1856), followed by the First and Second World Wars. In the United States, the first Federal excise laws were enacted to pay foreign debtors for their Revolutionary War loans (1791–1802). Excise was reintroduced due to the War of 1812 (1814–1817), then again to finance the American Civil War (1862–1865). Excise remained in place after the Civil War, with significant rate increases during the First and Second World Wars (1917 Lever Act).
The first British excise laws for liquor came into effect in 1663 for “beer, ale, cider and perry.” “Aqua vitae and strong waters” were also included when the Scottish Parliament enacted their version of the law in 1664. See strong water. Ten years after its introduction, the excise rate doubled, then doubled again four years later. Governments now had a lever to extract revenue from their citizens, and they used and abused this with increasing frequency. In 1660, Parliament created gaugers, or inspectors, who had the right to enter premises and measure prepared liquors (much as the Song had in China). As well as taxing spirits, the government began introducing license fees for manufacturing and retailing. These mounting statutes found consolidation under the 1662 Customs and Excise Act and the first Distillery Act in 1668.
The first laws to oversee product quality standards arrived with the 1696 Prevention of Fraud and Abuses Act. The spirits industry was given another competitive enhancement with the 1729 Act of Laying Down Duty upon Compounded Waters and Spirits, and Upon the Retailer of Spirituous Liquor in 1733. The category targeted was flavored malt spirit, especially gin, whose annual consumption skyrocketed (mainly in London) to thirty-one million liters in 1743. The demand for cheap malt spirit to rectify and compound into gin and British brandy helped commercialize the nascent Scottish distilling industry, as Lowland distilleries became a major supplier of malt and low wines to English rectifiers in the late eighteenth century.
After 1707, Great Britain comprised four polities: England, Wales, Scotland, and Ireland. Britain also administered the thirteen colonies of North America, adding Canada in 1763 and Australia in 1788. Each of these countries and colonies possessed differing levels of self-government, resulting in innumerable local laws and regulations, extending down to districts and towns with varying excise rates and distilling bylaws. They also incurred constant volatility due to regulatory changes. All shared strong cultural roots, comparable liquor consumption habits, and legal precedents for formulating their spirit laws from the British Parliament. To ensure compliance, governments needed to account for every drop of alcohol, whether locally manufactured or imported. Fines and penalties became additional sources of revenue and restraint of the trade and commerce, from still registration to smuggling. The first colony in America to enact excise was Connecticut in 1650, followed by Canada in 1780 and New South Wales in 1819. As colonies gained independence, they enacted new national excise, customs, and distilling laws: the United States in March 1791, Canada in July 1867, and Australia in January 1901.
Until the second half of the eighteenth century, a significant drawback was the inability to measure alcoholic strength precisely in order to extract duties from different liquors accurately. The introduction of the hydrometer (which could measure the proof of a spirit quickly and with good accuracy) in the eighteenth century and its eventual adoption by the government was an important step that also aided new manufacturing practices, such as allowing continuous distillation to be licensed.
In the United States, the cost of importing British copper, the recent invention of the steam engine, and different grain mashes led to the invention of wooden chambered steam stills in the 1790s. See still, three-chamber. By 1816, the federal government registered 650 steam boiler stills (these were also used by Canadian distilleries). The American Commissioner of Excise expressed concern of the inequalities between the ubiquitous common pot stills and these new wooden steam stills. Steam and the invention of continuous stills was also an issue to the British Board of Excise since 1801, which led to the rejection of many patent still submissions until the 1823 Excise Act. They alleged that high proof, high volume continuous patent stills did not conform with the government’s batch standards of measurement and risked illicit production and smuggling. Aeneas Coffey, inspector general of excise in Ireland until 1824, patented the most efficient continuous still in 1830, setting the stage for the growth of scotch and Irish blended whiskies under the 1823 Excise Act. See still, continuous.
In the late nineteenth century, the political influence of the temperance movement and abolitionists radically changed the social and regulatory landscapes in whisky countries. Restrictions and taxations on the public’s access to liquor were abundant, and in some instances the manufacture and sale of alcohol was banned outright. Notable incidents of national prohibitions were in Russia (1914–1924), Norway (1916–1927), Canada (1918–1920), and the United States (1920–1933). Other countries used local options to prohibit liquor manufacture and sale at regional and district levels. The consequences of prohibiting liquor sales to governments resulted in heavy financial deficits from the loss of excise revenue and high expenditures in policing and prosecuting illicit activities. By the mid-twentieth century, the political sentiment in liberal democracies shifted from controlling the trade to individual responsibility. The United Kingdom introduced breath testing in the 1967 Road Safety Act, establishing a maximum legal alcohol level; by the 1980s, most Western countries passed roadside breathalyzer tests.
Whisky excise per liter of alcohol in 2018 (100 percent ABV) is US$27.00 per gallon in the United States; £28.74 a liter in the the United Kingdom; CA$12.11 in Canada; €42.57 in Ireland; and AU$84.51 in Australia. While excise may be relatively high in some countries, it no longer serves as a major contributor to the national treasuries. Governments are increasingly being lobbied by organizations to raise duties to prevent or minimize harmful health effects from excessive long-term and dangerous episodic alcohol consumption.
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By: Chris Middleton