The 19th century saw the advent of global free trade. One of the first trade deals between two countries, the Cobden–Chevalier Treaty between Britain and France, was entered into in 1860. Yet, trade barriers remained high between many countries and even internal trade barriers existed in industrializing countries like France. Throughout the 19th century, French cities were permitted to collect customs duties, called the octroi, on goods entering city limits. Even in an age of economic liberalism, these taxes were not straightforward to repeal.
Internal Customs Barriers
Customs duties are usually associated with international trade alone. However, internal customs duties were collected in France even into the 20th century. These duties, called the octroi, were levied on goods crossing various internal borders, typically between the countryside and towns or communes. The money raised primarily went towards funding local government expenses. The octroi was descended from a Roman tax known as the vectigalia and was collected through the Middle Ages.
The octroi were initially abolished in 1791, during the French Revolution. They were then brought back by the Directory, which governed France from 1795 to 1799, as soon as 1798 in the case of Paris and within a few years thereafter in other cities. The tax had to be reintroduced because local expenses had grown during the Revolution, the result of mounting poor relief needs and the repairs to cities required in the wake of the Revolution. On top of all this, local institutions like schools and hospices that had been funded by endowments saw the value of these endowments collapse when the government repudiated its national debt. Local governments had to pick up the fiscal burden left behind.
Not long after Napoleon took power, thirty-four towns were collecting the octroi. A law regulating the tax in 1809 allowed this internal tariff to be collected by cities on arriving food and beverages, fuel, animal feed, and building materials. The money was largely used by local governments, which could elect to collect the tax themselves or outsource collection to a tax farmer.
Opposition
The octroi was a very controversial tax. It increased costs within towns and discouraged industry and craftsmen from establishing themselves in towns rather than the suburbs and countryside just outside the tariff barriers. The tax increased the price of food in particular; in Verdun in 1842, 90% of the goods taxed upon entry into that town were agricultural products including food. Officials went to great lengths to collect the tax; to catch smugglers, the government required inns to keep records of all lodgers, and taverns outside the cities were monitored too.
In Paris, the octroi customs gates were set ablaze just days before the storming of the Bastille. These customs gates were rebuilt upon reintroduction of the tax after the Revolution. Then, in the Revolution of 1830, the customs gates of Paris were again destroyed and customs officials harassed.
Mur des Fermiers Généraux
In the late 18th century, a wall was built around Paris, the mur des Fermiers généraux, not for defensive reasons but rather to enforce the octroi, collected at custom gates around the city. In cities without such a wall or otherwise weaker enforcement, it was easier to smuggle in goods. In Lyon for example, the taxes were initially only collected during daytime hours so butchers in the city trafficked cattle into Lyon at night. Of a more straightforward sort of avoidance, some industrial activity moved just outside the wall to avoid the octroi altogether.
The wall in Paris lost some of its practical importance in the 1860s when several suburban communes were absorbed by Paris and so the city’s customs barrier was relocated further out from the city center. At this point, the mur des Fermiers généraux was dismantled and in its place several boulevards were built.
Even after the mur des Fermiers généraux was dismantled, a tax barrier still existed, and not just on the roads leading to Paris but also in the city’s railway termini after the arrival of the railway; goods arriving by rail needed the tax paid as well. With the city’s expansion, officials also now needed to guard a larger circumference around Paris from smugglers and collect taxes on a larger volume of goods entering the city in more places. In all, 3,000 people were involved in collecting the octroi in Paris alone by the mid-1870s. The expansion of the area subject to the octroi also meant that people who had lived just outside the old city limits, partly for the lower cost of living, now had to pay higher prices for food.
Dependence on the Octroi
While unpopular and expensive to enforce, the octroi was crucial for municipal finance and even the national public finances. In 1801, the city of Marseille was collecting about 60% of its budget through the octroi. From 1806 until 1852, up to 10% of collections went towards the French national treasury but the rest were retained by the city governments enforcing the tax. While this was just one-tenth of the octroi money, in the early 19th century, the central government was collecting a growing portion of its revenues from indirect taxes like the octroi.
Efforts to reduce or eliminate the octroi existed before the 19th century of course, the tax being abolished previously during the French Revolution. In the 1830s, elected politicians in Paris campaigned to eliminate the octroi but Paris was growing quickly and the money raised by the tax was needed to build new urban amenities. Two-thirds of the city’s revenue were the result of the octroi in the period 1831-1847, up from about half in the Bourbon Restoration (1815-1830). While more progressive forms of taxation were considered, if the money raised by the octroi could be applied to the development of a sewer system or other improvements, progressive politics was able to come to terms with the unpopular octroi.
Difficult Abolition
A commission looked into abolishing the octroi in 1869, but it concluded that the taxes should be retained. A similar internal tariff was abolished in neighboring Belgium the following year. What is curious was that this was an era of trade liberalization; France was entering into trade treaties with Britain, a commercial rival, but still allowed customs barriers to exist internally within France.
In the 1880s, the abolition of the octroi in Paris was again debated. The advantages of abolishing the internal tariff barrier included a more frictionless movement of people and goods and an expansion of the city limits. However, until new money could be secured to fund municipal governments, the octroi remained crucial. In 1897, a new law permitted French communes to raise new taxes such as taxes on alcohol and carriages and surtaxes on people’s national direct taxes. Even still, the octroi was not completely abolished until the Second World War.
Lesson
On the surface, the octroi may have seemed like a tax on urbanization likely to restrict the economic prospects of French cities. Yet, France urbanized and industrialized. Whether by avoidance or otherwise, economies adapt to restrictive policies, masking but not eliminating their damaging effect. Even if better methods of raising revenues existed, when the infrastructure to collect a particular tax exists and people and businesses have become accustomed to paying it and an economy developed around the tax, the impetus for reform may be suppressed. Over time, the result can be a medieval tax largely abolished elsewhere but allowed to persist in one of the world’s leading countries of the 19th century.
More from the Tontine Coffee-House
Read about the landmark Cobden-Chevalier Treaty between Britain and France, Paris’s stock exchanges, and the financing of Haussmann’s renovation of Paris and the Paris Metro. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.
Further Reading
1. Galviz, Carlos López. Cities, Railways, Modernities: London, Paris, and the Nineteenth Century. Routledge, 2019.
2. Greenfield, Jerome. The Making of a Fiscal-Military State in Post-Revolutionary France. Cambridge University Press, 2022.
3. Ingram, Thomas Allan. “Octroi.” Encyclopaedia Britannica, 1911.
4. Merriman, John M. The Margins of City Life. Oxford University Press, 1991.
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