Note 95 — Chapter XXV · DEAR CHEAP FOOD.

Taxes on commodities do not always fall on consumers, but sometimes on producers, and sometimes on the intermediate agent. When a duty is imposed on a foreign commodity, which the importing country has facilities for producing at home, in ordinary cases the duty falls, in the first instance, on the consumer; but when the duty has the effect of increasing competition, the tendency is to a reduction in price, and therefore to the ultimate benefit of the consumers. As the duty equalizes the conditions of production between the local and foreign producers, it enables an entirely new class of competitors to enter the field,—namely, the local producers; and as the circle of competition becomes extended, the rivalry among producers becomes keener, and prices become lower; for competition inevitably leads to this when it is genuine and not a monopoly in disguise, as is often the case. If the duty fails to increase competition, it goes direct into the treasury as revenue; if it fails partially as a revenue tax, owing to the local producer contributing part of the supply, and paying no duty, the competition between the local and foreign producers will cause a reduction in price to the consumer, so that the falling off in the revenue will in some measure be compensated for. If the revenue from duty fail altogether, owing to the local article taking the place of the imported and duty-paying article, a three-fold benefit will be secured. The consumer will gain by a reduction in the price of commodities; the public will gain by increased employment of labour and capital; and, lastly, the State will gain by increased revenue from the additional number of revenue-producing population, supported by the new industry. (David Syme. Fortnightly Review, April, 1873.)

So with the English shipping dues, which, as a matter of fact, are not paid by the merchants or consumers, but by the shipowners.

In answer to a deputation which waited on the Chancellor of the Exchequer recently, Mr. Lowe, adopting the popular view on the question, attempted to explain that the shipowners did not pay the dues out of their own pockets, that they only advanced the money to the merchant, that the merchant again indemnified himself by raising the price of goods to the consumer. But it appeared that in this particular case Mr. Lowe’s theory did not square with the facts, as the deputation, which consisted of the leading shipowners in England, positively assured him that no such transfer took place.

A tax may, under certain conditions, have the very opposite effect from that which it usually has, for instead of increasing the price of a commodity it may have the effect of diminishing it. (This has been the case with cotton in America, as shewn by the evidence given before the Select Committee of the House of Commons, in 1840.) (Fortnightly Review, 1873.)