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The Tea Act of 1773 was an Act of the Parliament of Great Britain. Its principal overt objective was to reduce the massive surplus of tea held by the financially troubled British East India Company in its London warehouses and to help the struggling company survive. A related objective was to undercut the price of illegal tea, smuggled into Britain's North American colonies. This was supposed to convince the colonists to purchase Company tea on which the Townshend duties were paid, thus implicitly agreeing to accept Parliament's right of taxation. The Act granted the Company the right to directly ship its tea to North America and the right to the duty-free export of tea from Britain, although the tax imposed by the Townshend Acts and collected in the colonies remained in force. It received the royal assent on May 10, 1773
On this day in 1773, the British Parliament passes the Tea Act, a bill designed to save the faltering East India Company from bankruptcy by greatly lowering the tea tax it paid to the British government and, thus, granting it a de facto monopoly on the American tea trade. Because all legal tea entered the colonies through England, allowing the East India Company to pay lower taxes in Britain also allowed it to sell tea more cheaply in the colonies. Even untaxed Dutch tea, which entered the colonies illegally through smuggling, was more expensive the East India tea, after the act took effect.
British Prime Minister, Frederick, Lord North, who initiated the legislation, thought it impossible that the colonists would protest cheap tea he was wrong. Many colonists viewed the act as yet another example of taxation tyranny, precisely because it left an earlier duty on tea entering the colonies in place, while removing the duty on tea entering England.