<P> Controversy between Great Britain and the colonies arose in the 1760s when Parliament sought, for the first time, to impose a direct tax on the colonies for the purpose of raising revenue . Some colonists, known in the colonies as Whigs, objected to the new tax program, arguing that it was a violation of the British Constitution . Britons and British Americans agreed that, according to the constitution, British subjects could not be taxed without the consent of their elected representatives . In Great Britain, this meant that taxes could only be levied by Parliament . Colonists, however, did not elect members of Parliament, and so American Whigs argued that the colonies could not be taxed by that body . According to Whigs, colonists could only be taxed by their own colonial assemblies . Colonial protests resulted in the repeal of the Stamp Act in 1766, but in the 1766 Declaratory Act, Parliament continued to insist that it had the right to legislate for the colonies "in all cases whatsoever". </P> <P> When new taxes were levied in the Townshend Revenue Act of 1767, Whig colonists again responded with protests and boycotts . Merchants organized a non-importation agreement, and many colonists pledged to abstain from drinking British tea, with activists in New England promoting alternatives, such as domestic Labrador tea . Smuggling continued apace, especially in New York and Philadelphia, where tea smuggling had always been more extensive than in Boston . Dutied British tea continued to be imported into Boston, however, especially by Richard Clarke and the sons of Massachusetts Governor Thomas Hutchinson, until pressure from Massachusetts Whigs compelled them to abide by the non-importation agreement . </P> <P> Parliament finally responded to the protests by repealing the Townshend taxes in 1770, except for the tea duty, which Prime Minister Lord North kept to assert "the right of taxing the Americans". This partial repeal of the taxes was enough to bring an end to the non-importation movement by October 1770 . From 1771 to 1773, British tea was once again imported into the colonies in significant amounts, with merchants paying the Townshend duty of three pence per pound . Boston was the largest colonial importer of legal tea; smugglers still dominated the market in New York and Philadelphia . </P> <P> The Indemnity Act of 1767, which gave the East India Company a refund of the duty on tea that was re-exported to the colonies, expired in 1772 . Parliament passed a new act in 1772 that reduced this refund, effectively leaving a 10% duty on tea imported into Britain . The act also restored the tea taxes within Britain that had been repealed in 1767, and left in place the three pence Townshend duty in the colonies . With this new tax burden driving up the price of British tea, sales plummeted . The company continued to import tea into Great Britain, however, amassing a huge surplus of product that no one would buy . For these and other reasons, by late 1772 the East India Company, one of Britain's most important commercial institutions, was in a serious financial crisis . The severe famine in Bengal from 1769 to 1773 had drastically reduced the revenue of the East India Company from India bringing the Company to the verge of bankruptcy and the Tea Act of 1773 was enacted to help the East India Company . </P>

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