The Seven Years' War, also known as the French and Indian War, lasted between 1754 and 1763, and cost the British Empire millions of pounds. Because the war was so expensive and was fought largely in North America, the British government raised taxes on colonists. This sentiment was not shared by colonists, however, and it led to political disagreement and the American Revolution.
Britain's Financial Burden
When Britain entered the Seven Years' War with France in 1754, the country was financially ill-prepared. In 1754, the country's national debt totaled 75 million pounds. By the end of the war, the debt ballooned to 133 million pounds, almost double what it was at the beginning of the conflict. Much of this debt was financed by British and Dutch bankers. While Britain won the war and expanded its territorial control across the world, the nation needed a way to pay its finances. Its colonies abroad, including those in North America, presented a politically favorable way of generating revenue. Taxes were thus imposed as a convenient way to increase the country's income.
North America's Benefits from the War
The British thought they had benefitted North American colonists during the Seven Years' War by defending their homes from invasion. While the war was a global war -- fought in Europe, India, the Caribbean and elsewhere -- many major battles took place in North America. The results of British victory included territorial gains in Canada, the Caribbean and Western North America. To the British, these gains directly benefited the lives of North American colonists. Arguably, they positively impacted colonial life more than British life at home. As such, the British thought it was right that the American colonies should pay a significant piece of the cost of acquiring new territory and defending the colonies.
While the war itself was expensive, it also imposed new ongoing costs in the form of North American standing armies. Prior to the Seven Years' War, the colonies defended themselves through self-equipped militias. The addition of significant new territory west of the Appalachian Mountains and into Canada, however, made the British wary of the colonists' ability to defend themselves. They were particularly concerned about large Indian populations living in these newly acquired regions. As such, the British government decided to position permanent-standing armies in the colonies. Because these were designed specifically to defend the colonies, the British thought it made sense for the colonists to pay for them.
Asserting Parliament's Rights
While financial matters were a significant part of the British argument in favor of colonial taxation, another matter became prominent in the 1760s: Parliament's political authority over the colonies was absolute. By the 1760s, taxes and customs like the Stamp Act and the Navigation Acts were irritating the colonists. They contended that Parliament had no right to tax them without representation. Parliament, however, disagreed. This idea culminated in the Declaratory Act of 1766, which declared that the colonies were "subordinate to, and dependent upon the imperial crown and parliament of Great Britain." Thereafter, some of Britain's imposition of taxes on the colonies was merely a way of demonstrating Parliament's authority in the region.