An Introduction to Value-added Taxation

The debate about the use of commodity taxation as a means of protectionism is as old as the taxation of commodities itself. There were plenty of quarrels about the alleged discrimination against foreign goods and the distribution of tax revenues between different regions in medieval Europe. In 1158 a quarrel over the salt tax between bishop Otto of Freising and Henry the Lion resulted in the foundation of the city of Munich. Emperor Friedrich Barbarossa, himself, had to decide on a mutually acceptable distribution of salt-tax revenues, preventing a bloody battle at the very last minute. Elsewhere such tax quarrels were not settled so peacefully. The Alcabala, an early form of a sales tax, which was levied in Spain and its dependencies, infuriated Spain’s trading partners to such an extent that Spanish tax collectors abroad were sometimes killed. Although the battle ground has largely moved to the conference table or the courts, tax discrimination between domestic and foreign goods draws just as much attention today as it did in the Middle Ages.