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Excise duties are taxes on specific goods, often added to raise funds or penalize harmful consumption. Merchants collect and remit them to the government, and they can be charged per unit or ad valorem. They are often levied on goods that indirectly cost society, such as alcohol, tobacco, and gasoline. Excise taxes have been around since the 17th century and are controversial due to their impact on consumer costs.
Excise duties are taxes levied on the production and sale of particular goods. One of the most widespread examples of an excise tax is the additional tax that many nations impose on alcohol. There are a number of reasons for a nation to order the payment of an excise tax, from the desire to raise additional funds to the goal of penalizing people who buy or use things that are considered harmful. Classically, excise duties are lumped directly into the cost of an item, which can make them invisible to the consumer.
Unlike things like income taxes, which are paid directly by the consumer, merchants collect excise taxes and then remit them to the government, just like a sales tax. Merchants are responsible for ensuring the correct amount is collected and for passing it on to the government in a timely manner. It may also be necessary for merchants to receive a special permit from the government that allows them to collect excise duties.
In some cases, an excise tax is charged per unit, which means that merchants charge a flat rate per unit of the product. Other excise taxes are ad valorem taxes, charged according to the value of the item. In both cases, the merchant can choose to include excise tax in the list price of the item, or indicate to consumers that the sale price does not include excise tax and sales tax. The presence of an excise duty can significantly raise the cost of an item from the list price, which can be frustrating for consumers.
Excise taxes are often levied on goods that indirectly cost the government and society. Alcohol, for example, contributes to traffic accidents, which require the response of emergency services and medical personnel. Tobacco, another commonly excisable item, also costs the health care system a great deal of money, and some tobacco excises are also used to pay for tobacco education and cessation programs. Gasoline is another commodity that is often taxed, with taxes paid for highway maintenance, air quality control measures, and other costs associated with gasoline consumption.
Governments have been collecting excise duties since the 17th century, and the system has become much more elaborate and comprehensive than it was when the Dutch first developed it. Governments justify excise programs by explaining that they generate the necessary funds, as well as by reminding consumers that some products are harmful and dangerous, and that reducing consumption could be beneficial. Taxpayers and consumers of such products often resent excise duties because they add significantly to the costs of the products.
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