A curious tax from our present view, which existed for a long time in Germany, was the commodity tax. Since 1909, this excise duty was first levied on matches and firing chips, later also on lighters and all other objects with which to ignite fire. But there were also comparable taxes abroad, as matches were the most important means of making fires for cooking, lighting or heating for many decades. A side effect of the commodity tax was the commodity monopoly, which was also introduced both in Germany and abroad. Especially in Germany, it persisted for many decades, but today has already largely fallen into oblivion.

1. The ignition tax – introduction

One quality that distinguishes man and animal is the ability to make fire. In fact, there are many examples in the animal kingdom of what, albeit limited, can be called culture, such as the ability to produce and use tools. The use of fire is limited to humans. This property is widespread in (almost) all human cultures. This underlines the importance of this feature.

Actually, in earlier ages, the kindling of fire was quite a tricky, often laborious procedure. For a long time, sulfur gravel, flint and tinder mushrooms were used to ignite fire from sparks. In any case, this seems to us today, since we are accustomed to making fire comfortably with matches or lighters.

The development of matches was anything but straightforward. There was a whole series of inventions that aimed to produce a match that was both simple to use in everyday use and minimized the risk of self-ignition. Because the first matches had a coating of white phosphorus, which was highly reactive and could therefore already ignite itself, not to mention inflammation by friction of such matches among each other. The breakthrough finally brought the so-called safety matches, which exist almost unchanged until today. Sweden, which also likes to boast its affinity in terms of security, also claims this invention for itself.

2. The ignition tax in Germany

2.1. Attractiveness of the ignition tax

That the state at the beginning of the 20. It makes sense to impose a tax on the sale of matches and similar aids, because this happened at a time when virtually every household had at least one open fire burning. After all, most people in Germany and elsewhere in the world cooked and heated more than a hundred years ago mainly with wood and coal stoves, less often with gas stoves. Also for the lighting of lamps of the time, candles, kerosene and parafin lamps, for example, a match was very helpful.

2.2. introduction of the commodity tax 1909 in Germany

Since every household was therefore dependent on the use of matches, it was obvious that the state introduced a corresponding tax, the so-called ignition tax. This happened in Germany for the first time in 1909.

Source: https://www.reichsgesetzblatt.de/D/RGBl-D/1909/index.htm

Similar to the tobacco tax on tobacco products (which also needed a match to light, which made the commodity tax even more attractive), the commodity tax was also a traffic tax. Initially, the commodity tax was 1 penny for packing units of a maximum of 29 matches and 1.5 pennies for packing units between 30 and 60 matches. The combustibles tax for larger packages was extrapolated accordingly.

You have to remember that 1 Reichspfennig certainly had purchasing power at that time. Especially for poorer households, the ignition tax was therefore quite a certain tax burden, albeit not excessive. For a better understanding: The purchasing power of 1 mark in 1909 corresponds to about EUR 7 today (according to the purchasing power equivalence table of the Bundesbank). Nevertheless, the ignition goods tax law of 1909 already provided in § 3 a tightening for the first five years after the entry into force of the law. During this period, the tax was 20% more than the regular rate.

Taxable was either the domestic manufacturer or the importer. When manufactured domestically, the goods could not be put into circulation until the ignition tax was paid. Here again, this excise duty is similar to the tobacco tax. On the import, however, the ignition tax had to be paid together with the duty due.

2.3. Political debate on the introduction of the ignition tax in Germany

Interesting here is the controversial discussion on the introduction of the ignition tax. Thus, representatives of the SPD spoke out in favor of a postponement of the consultations on the introduction of the ignition tax. Representatives of liberal parties, on the other hand, proposed a different approach, which should do without the tax on ignition. Their proposal was aimed at a state monopoly. However, this idea was anything but new. In fact, they had also looked over the state borders. In France, for example, there was both a monopoly on commodities and a commodity tax. More on that in a moment.

2.4. Subsequent changes to the ignition product tax in Germany

In 1919 there was already a first change in the law. This was due in particular to the fact that the scope of the control substrate was to be extended by new types of ignition products, so that all were covered by the ignition tax. This was especially true of the then new lighters.

In 1923, the tax rate for the commodity tax was finally increased. After all, Germany was short of cash after the lost war. Now the tax was 20 % on the value that a manufacturer, including boxes (but without outside packaging, if charged separately), demanded from its customers. At the time, this was a fairly high tax rate, but the vast majority of citizens were also dependent on these products, with the purchase price still remaining affordable despite the fire goods tax. But it should be even stronger.

3. commodity tax and commodity monopolies complement each other

3.1. Monopoly of ignition products in Germany

3.1.1. Introduction of the ignition monopoly in Germany

The fact that we have highlighted Sweden's role in relation to ignition products in the introduction has another concern. Because with their safety matches, the Scandinavian country quickly became one of the most important producers of matches worldwide. His influence on the match industry soon extended to Germany.

In fact, it was thanks to a single Swedish entrepreneur, Ivar Kreuger, that a monopoly on ignition was introduced in Germany at the beginning of 1930. Because Kreuger convinced the then damn Reich government to this trade by subscribing in return a bond for USD 125 million, which at that time corresponded to RM 525 million. After all, the Weimar Republic was at that time in the stranglehold of the world economic crisis, whose financial situation was exacerbated by the still existing reparations demands of the victorious powers of the First World War.

In return, in addition to the monopoly on combustibles, several other important details were also contractually regulated between the German Reich and Ivar Kreuger. This includes, among other things, a fixed takeover price, which the factories should receive. Further conditions concerned the maturity of the repayment, which should include 40 years starting in 1940, and the interest rate of 6 %, which at that time was quite moderate.

3.1.2. The procedure of the match king Ivar Kreuger

As in many other countries worldwide, Kreuger had previously bought one match factory after another in Germany. Subsequently, he had his quasi-existing de facto monopoly secured by a state monopoly law via trade with the respective government, for which he made foreign capital with a long term available in return. But this also meant that Germany no longer allowed imported ignition goods. Kreuger had already been successful in other countries, including the Baltic states of Estonia, Latvia and Lithuania, France and the Kingdom of Romania. In other countries he had at least brought it to a de facto monopoly (for example in Belgium and Bulgaria).

3.1.3. Further reasons for the German ignition monopoly

In Germany, cheap imports from the USSR had previously become the biggest competitor. This reduced both the tax revenues from the commodity tax, but also endangered the domestic commodity industry, so that the German state also had an interest in creating a commodity monopoly. In fact, this was already on the agenda of German politics before the deal with Kreuger.

3.1.4. The end of the ignition monopoly in Germany

In any case, the combustible monopoly remained in force beyond the end of the Second World War. It should last at least until the bond has been repaid. This was only the case in 1983. But already in 1981, the legislature decided to abolish the now antiquated commodity tax. In the meantime, tax revenue had fallen considerably due to the decline in the everyday importance of Streichholz & Co. On the other hand, the administrative burden remained and thus caused almost more costs than the state could collect with the tax.

3.2. Monopoly of combustibles in France

As already mentioned, even before the ignition monopoly in Germany, such a monopoly had already been introduced in France. And already much earlier, namely in the aftermath of the Franco-German War of 1870/71. At that time, there was a clear need for financing due to the dramatic post-war consequences in France, which was tried to contain by nationalising all domestic producers of ignition products. This allowed a uniform price to be charged for the coveted wood, which then incurred a correspondingly high commodity tax. Thus, it was possible to control the tax revenues from this source.

3.3. Monopoly of combustibles in the Tsarist Empire

In the 19th century, there was also a state monopoly on the production of matches in the Russian Empire. In this way, the state hoped to gain control over the financial revenues from this lucrative source, which also extended to taxation under a fire duty.

3.3. More ignition monopolies worldwide

This subchapter serves to complete the extensive list of states with which Ivar Kreuger achieved a state monopoly on commodities in exchange for financial assistance. In Europe, these include the Kingdoms of Greece and Yugoslavia, as well as Poland, Portugal and Hungary. He was also able to repeat this success in Bolivia, Ecuador, Guatemala, Peru and Turkey.

Other countries in which Kreuger’s entrepreneurial activities in the ignition industry grew into a monopoly were Great Britain, India, Japan and South Africa. We already mentioned Belgium and Bulgaria. Through France and Great Britain, his matches also reached their colonies, so it can be assumed that Kreuger was aiming for a global monopoly on commodities. Only the communist USSR remained closed to him.

3.4. The “Match-King” is speculating

In order to end the story of the King of Matches Ivar Kreuger, closely linked to the monopoly on commodities in Germany and elsewhere, a few more lines are allowed.

His business model was partly based on the ongoing inclusion of investors, to whom Kreuger then paid high dividends from those very sources. With this and through creative accounting, sometimes also through fraud, as well as his extreme secrecy, he could give the impression of an incredibly successful tycoon – and investors celebrated him accordingly.

Unsurprisingly, however, this could only go well for a while. In the course of the world economic crisis of 1929, it became increasingly difficult for Kreuger to obtain new financing. As the situation became more and more unsatisfactory for Kreuger’s creditors and they wanted to bring him to justice, he decided in 1932 for suicide. Many of his companies went under, but some survived and are still economically successful today.

4th ignition tax abroad

4.1. Tax on commodities in France

At the same time that France first introduced its monopoly on commodities, there was also a commodity tax on matches. Depending on the type of matches and the size of their packaging units, the tax was between 1.5 and 10 centimes. The tax on ignition was abolished in France in 1982.

However, the commodity tax was reintroduced in 1987 in France. It was 2 cents for boxes with contents up to a maximum of 100 matches. In parallel, it also applied to lighters. There were 50 cents per unit. But already in 1997 this ignition tax was also put an end to.

4.2. Tax on commodities in Russia

In the Tsarist Empire, a commodity tax was introduced in 1848. Together with the aforementioned commodity monopoly, this source of income remained until the beginning of the 20th century. It is a century.

4.3. Tax on ignition in Italy

Italy also introduced a commodity tax in the 19th century. This happened in 1895.

4.4. commodity tax in the USA

In the time of the American Civil War, the introduction of a commodity tax in the USA falls. In 1862, a year after the beginning of the Civil War, the state levied a levy on the sale of matches in the part it controlled. Although there were already safety matches at that time, which were flammable only on the supplied friction surfaces, this market was for a long time reserved for the previous compression-ignition matches, which are generally associated with Westerns in popular culture.

In fact, the introduction of the ignition tax and other excise duties coincides with the introduction of the income tax and many other taxes in the US. They should help raise funds to finance the war of secession. Although this was initially only earmarked, but at least the income tax has continued since that time – until today.

4.5. Attempt to introduce a commodity tax in the UK and the Matchgirls strike

There were also in the United Kingdom in the mid-19th century. Century Efforts to impose a commodity tax. However, this attempt failed in 1871 due to the resistance of the match manufacturers and their employees. Queen Victoria also opposed it.

Interesting in this context is the strike of the so-called Matchgirls known in the UK to this day. Matchgirls were mostly young women who were involved in the production of matches at that time. In 1888, they protested against the health-unacceptable working conditions, too long working hours and a ridiculously low pay rate, which in extreme cases even provided for penalties – with success. These protests subsequently led to the formation of labour movements and trade unions, and indirectly to the suffragette movement.

5th commodity tax and commodity monopoly – Conclusion

What we can learn from the history of the commodity tax and the commodity monopoly is that in times of great financial need, the state often falls for the introduction of special taxes or other sources of income. This was the case in France after the end of the Franco-German War of 1870/1871 as well as in the introduction of a combustibles tax in the USA at the beginning of the civil war there or in Germany’s arming empire or in the war-torn Weimar Republic. However, as soon as a tax source dries up and the administrative effort for its collection is hardly worth it anymore, a tax is usually eliminated.

But it also shows that especially purposeful entrepreneurs can exert an enormous influence on governments – regardless of how seriously they can underpin their success so far. What was once an Ivar Kreuger is now comparable to a René Benko, albeit on different scales. Another parallel: both have concentrated in their undertakings on an economic asset in their respective times in great demand. The price differences between the matches of the Swede and the real estate of the Austrian may be huge, but the effect is basically similar. Obviously, representatives from business and politics have learned little from history. This too is an insight, though not surprising.