The word itself is of french origin. Octroi taxes have a respectable antiquity, being known in Roman times as vectigalia. These vectigalia were either the portorium, a tax on the entry from or departure to the provinces (those cities which were allowed to levy the portorium shared the profits with the public treasury); the ansarium or foricarium, a duty levied at the entrance to towns; or the edulia, sales imposts levied in markets. Vectigalia were levied on wine and certain articles of food, but it was seldom that the cities were allowed to use the whole of the profits of the taxes. Anglican Bishop Charles Ellicott suggested that the role of Matthew the tax collector in the gospels (Matthew 9:9) was "to collect the octroi levied on the fish, fruit, and other produce that made up the exports and imports of Capernaum" on the Sea of Galilee.
During the 12th and 13th centuries, when the towns succeeded in asserting their independence, they at the same time obtained the recognition of their right to establish local taxation, and to have control of it. The royal power, however, gradually asserted itself, and it became the rule that permission to levy local taxes should be obtained from the king. From the 14th century onwards, there are numerous charters granting (octroyer) to French towns the right to tax themselves. The taxes did not remain strictly municipal, for an ordinance of Cardinal Mazarin (in 1647) ordered the proceeds of the octroi to be paid into the public treasury, and at other times the government claimed a certain percentage of the product, but this practice was finally abandoned in 1852.
From an early time, octroi collection was farmed out to associations or private individuals, and so great were the abuses which arose from the system that the octroi was abolished during the French Revolution. But such a drastic measure meant the stoppage of all municipal activities, and in 1798 Paris was allowed to re-establish its octroi. Other cities were allowed gradually to follow suit, and in 1809 a law was passed laying down the basis on which octrois might be established. Other laws were passed from time to time in France dealing with the octroi, in 1816, 1842, 1867, 1871, 1884, and 1897. By the law of 1809 octroi duties were allowed on beverages and liquids, food, fuel, forage, and building materials. A scale of rates was fixed, graduated according to the population, and farming out was strictly regulated. Under the law of 1816, an octroi could only be established at the wish of a municipal council, and only articles destined for local consumption could be taxed. The law of 1852 ended the payment of 10% of the gross receipts to the national treasury. Certain indispensable commodities were allowed to enter free, such as grain, flour, fruit, vegetables, and fish.
French octroi duties were collected by several procedures.
From time to time there was agitation in France for the abolition of octroi duties, but it was never pushed very earnestly. In 1869, a commission considered the matter, and reported in favour of their retention. Octrois were finally abolished in 1948.
A similar tax, called the Alcabala, was collected in Spain and the Spanish colonies. This tax was in force in Mexico until a few years before the Mexican Revolution of 1910. In 1910, octroi duties still existed in Italy, Spain, Portugal, and some towns in Austria.
Octroi was still in use in the 1990s by local authorities in Pakistan for domestic goods movements. Although abolished for general trade in 1997, octroi was still being charged on certain commodities such as electricity as late as 2006. As of 2013, octroi is levied in Ethiopia.
Cities in the Indian state of Maharashtra briefly abolished octroi in 2013 and replaced it with local body tax. However, octroi was reestablished there in 2014, due to decreased revenues from the local body tax. As of 1 July 2017, with the introduction of GST country-wide, the octroi has been abolished.
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