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# Drawbacks

## Definition

A system of tax refunds granted to merchants who export goods, allowing them to recover either the full amount or a portion of excise or inland duties originally imposed on domestic production. This mechanism aims to prevent domestic taxes from discouraging exports by ensuring that goods can be sold competitively in foreign markets without the burden of duties that would not be recoverable in those markets.

## Source Chapter

Book IV, Chapter 4

## Context

The chapter examines various forms of export encouragements, positioning drawbacks as the most reasonable approach. Smith argues that drawbacks do not artificially direct capital toward particular employments but merely prevent duties from driving capital away from natural market opportunities. The discussion includes specific examples of how drawbacks function for different commodities like tobacco, sugar, and wine, and how various rules have been applied over time to balance revenue collection with export promotion.

## Economic Domain

Regulation

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