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# Excise Duty Drawback

## Definition

A specific type of drawback that allows merchants to recover the entire amount or a portion of excise duties imposed on domestically produced goods when those goods are exported. This mechanism ensures that domestic taxation does not create an artificial price disadvantage in foreign markets, allowing domestic producers to compete on equal terms with foreign competitors who face no such duties.

## Source Chapter

Book IV, Chapter 4

## Context

Smith uses this mechanism as a prime example of how drawbacks function to preserve the natural division and distribution of labour in society. By allowing merchants to recover excise duties upon exportation, the policy prevents these taxes from artificially driving capital away from certain employments and maintains the balance that would naturally establish itself among various economic activities.

## Economic Domain

Regulation

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