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Encyclopedia > Tariff
Public finance
This article is part of the series:
Finance and Taxation
Taxation
Income tax  ·   Payroll tax
CGT  ·   Stamp duty
Sales tax  ·   VAT  ·   Flat tax
Tax, tariff and trade
Tax incidence
Tax rate  ·   Proportional tax
Progressive tax  ·   Regressive tax
Tax advantage

Economic policy
Monetary policy
Central bank  ·   Money supply
Fiscal policy
Spending  ·   Deficit  ·   Debt
Trade policy
Tariff  ·   Trade agreement
Finance
Financial market
Financial market participants
Corporate  ·   Personal
Public  ·   Banking  ·   Regulation

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For other uses of this word, see tariff (disambiguation).

A tariff is a tax on foreign goods upon importation. When a ship arrives in port a customs officer inspects the contents and charges a tax according to the tariff formula. Since the goods cannot be landed until the tax is paid, it is the easiest tax to collect, and the cost of collection is small. Traders seeking to evade tariffs are known as smugglers. Image File history File links Mergefrom. ... An import tariff or import duty is a schedule of duties imposed by a country on imported goods. ... This article does not cite any references or sources. ... Image File history File linksMetadata Size of this preview: 800 × 600 pixelsFull resolution (2816 × 2112 pixel, file size: 2. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income... This article is the current Taxation Collaboration of the Month. ... A capital gains tax (abbreviated: CGT) is a tax charged on capital gains, the profit realized on the sale of an asset that was purchased at a lower price. ... Stamp duty is a form of tax that is levied on documents. ... A sales tax is a consumption tax charged at the point of purchase for certain goods and services. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Value added tax (VAT), or goods and services tax (GST), is... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion on income), as opposed to a graduated, or progressive, scheme. ... The tax, tariff and trade laws of a political region, state or trade bloc determine which forms of consumption and production tend to be encouraged or discouraged. ... First discussed by the Physiocrats in France, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. ... A tax (also known as a dutyor Zakat in islamic economics) is a charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e. ... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion of income), as opposed to a graduated, or progressive, scheme. ... A progressive tax is a tax imposed so that the tax rate increases as the amount to which the rate is applied increases. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A regressive tax is a tax imposed so that the tax... Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_the_British_Virgin_Islands. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_Germany. ... Image File history File links Flag_of_Hong_Kong. ... Image File history File links Flag_of_India. ... Image File history File links Flag_of_Indonesia. ... Image File history File links Flag_of_the_Netherlands. ... Image File history File links Flag_of_New_Zealand. ... Image File history File links Flag_of_Peru. ... Image File history File links Flag_of_Ireland. ... Image File history File links Flag_of_Russia. ... Image File history File links Flag_of_Singapore. ... Image File history File links Flag_of_Tanzania. ... Image File history File links Flag_of_the_United_Kingdom. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links This is a lossless scalable vector image. ... Comparison of tax rates around the world is a difficult and somewhat subjective enterprise. ... This table lists OECD countries by total tax revenue as percentage of GDP (as of 2005). ... Not to be confused with Political economy. ... It has been suggested that monetary theory be merged into this article or section. ... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ... Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ... Government spending or government expenditure consists of government purchases, which can be financed by seigniorage (the creation of money for government funding, at a heavy price of high inflation and other possibly devastating consequences), taxes, or government borrowing. ... A budget deficit occurs when an entity (often a government) spends more money than it takes in. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is... This article does not cite any references or sources. ... A trade pact is a wide ranging tax, tariff and trade pact that usually also includes investment guarantees. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... This article does not cite any references or sources. ... There are two basic financial market participant catagories, Investor vs. ... Domestic credit to private sector in 2005 Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. ... This article does not cite any references or sources. ... For other uses, see Bank (disambiguation). ... The article on trade-barrier tariffs exists at Tariff. ...


Tariffs may be of various kinds:

  • An "ad valorem tariff" is a percentage of the value of the item, say 10 cents on the dollar
  • A "specific tariff" does not relate to the value of the imported goods but to its weight, volume, surface, etc. The specific duty stipulates how many units of currency are to be levied per unit of quantity (e.g. US$2 per kg).

and have various intended purpose:

  • A "revenue tariff" is a set of rates designed primarily to raise money for the government. A tariff on coffee imports, for example (imposed by countries where coffee cannot be grown) raises a steady flow of revenue.
  • A "protective tariff" is intended to artificially inflate prices of imports and "protect" domestic industries from foreign competition (see also effective rate of protection). For example, a 50% tax on an imported machine that raises the price from $100 to $150. Without a tariff the local manufacturers could only charge $100 for the same machine; now they can charge $149 and make the sale.
  • A "prohibitive tariff" is one so high that no one imports any of that item.

The distinction between protective and revenue tariffs is subtle: protective tariffs in addition to protecting local producers also raise revenue; revenue tariffs produce revenue but they also offer some protection to local businessmen. The effective rate of protection is a statistic used by economists to measure the real protection yielded by import duties or tariffs. ...


Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union. The tax, tariff and trade laws of a political region, state or trade bloc determine which forms of consumption and production tend to be encouraged or discouraged. ... An industrial policy is any government regulation or law that encourages the ongoing operation of, or investment in, a particular industry. ... An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e. ... This article needs to be cleaned up to conform to a higher standard of quality. ... A trade bloc is a large free trade area or free trade area formed by one or more tax, tariff and trade agreements. ... A customs union is a free trade area with a Common External Tariff. ...


If a country's major industries lose to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy. Protective tariffs have been used as a measure against this possibility. However, protective tariffs have disadvantages as well. The most notable is that they increase the price of the good subject to the tariff, disadvantaging consumers of that good or manufacturers who use that good to produce something else: for example a tariff on food can increase poverty, while a tariff on steel can make automobile manufacture less competitive. They can also backfire if countries whose trade is disadvantaged by the tariff impose tariffs of their own, resulting in a trade war and, according to free trade theorists, disadvantaging both sides. A boy from an East Cipinang trash dump slum in Jakarta, Indonesia shows what he found. ... A trade war refers to two or more nations raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. ...


There are two main ways of implementing a tariff:

  • An ad valorem tariff is a fixed percentage of the value of the good that is being imported. Sometimes these are problematic as when the international price of a good falls, so does the tariff, and domestic industries become more vulnerable to competition. Conversely when the price of a good rises on the international market so does the tariff, but a country is often less interested in protection when the price is higher. They also face the problem of transfer pricing where a company declares a value for goods being traded which differs from the market price, aimed at reducing overall taxes due.
  • A specific tariff is a tariff of a specific amount of money that does not vary with the price of the good. These tariffs may be harder to decide the amount at which to set them, and they may need to be updated due to changes in the market or inflation.

Adherents of supply-side economics sometimes refer to domestic taxes, such as income taxes, as being a "tariff" affecting inter-household trade. Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. ... Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively managed using incentives for people to produce (supply) goods and services, such as adjusting income tax and capital gains tax rates. ...

Contents

Economic analysis

Some economic theories hold that tariffs are a harmful interference with the individual freedom and the laws of the free market. They believe that it is unfair toward consumers and generally disadvantageous for a country to artificially maintain an inefficient industry, and that it is better to allow it to collapse and to allow a new one to develop in its place. The opposition to all tariffs is part of the free trade principle; the World Trade Organization aims to reduce tariffs and to avoid countries discriminating between other countries when applying tariffs. Face-to-face trading interactions on the New York Stock Exchange trading floor. ... Mohandas K. Gandhi - Freedom can be achieved through inner sovereignty. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... “WTO” redirects here. ...

In the following graph we see the effect that an import tariff has on the domestic economy. In a closed economy without trade we would see equilibrium at the intersection of the demand and supply curves (point B), yielding prices of $70 and an output of Y*. In this case the consumer surplus would be equal to the area inside points A, B and K, while producer surplus is given as the area A, B and L. When incorporating free international trade into the model we introduce a new supply curve denoted as SW. This curve makes the assumption that the international supply of the good or service is perfectly elastic and that the world can produce at a near infinite quantity at the given price. Obviously, in real world conditions this is somewhat unrealistic, but making such assumptions is unlikely to have a material impact on the outcome of the model. In this case the international price of the good is $50 ($20 less than the domestic equilibrium price). Image File history File links Surplus_with_tariff-v2. ... Price of market balance In economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the abscence of external shocks the (equilibrium) values of economic variables will not change. ... Supply curve shift Consumer surplus or Consumers surplus (or in the plural Consumers surplus) is the economic gain accruing to a consumer (or consumers) when they engage in trade. ... This page deals with the various forms of economic surplus, including producer, consumer, government, and social/total surplus. ... In economics, elasticity is the ratio of the proportional change in one variable with respect to proportional change in another variable. ...


As a result of this price differential we see that domestic consumers will import these cheaper international alternatives, while decreasing consumption of domestic made produce. This reduction in domestic production is equal to Y* minus Y1, thus reducing producer surplus from the area A, B and L to F, G and L. This shows that domestic producers are unambiguously worse off with the introduction of international trade. On the other hand we see that consumers are now paying a lower price for the goods, which increases the consumer surplus from the area A, B and K to a new surplus of F, J and K. From this increase in consumer surplus we see that some of this surplus was, in fact, redistributed from producer surplus, equal to the area A, B, F and G. However, the net societal gains from trade, in terms of net surplus, are equal to the area B, G and J. The level of consumption has increased from Y* to Y2, while imports are now equal to Y2 minus Y1.


Let’s say we now introduce a tariff of $10/unit on imports. This has the effect of shifting the world supply curve vertically by $10 to SW + Tariff. Again, this will create a redistribution of surplus within the model. We see that consumer surplus will decrease to the area C, E and K, which is a net loss of the area C, E, F and J. This now makes consumers unambiguously worse off than under a free trade regime, but still better off than under a system without trade. Producer surplus has increased, as they are now receiving an extra $10 per sale, to the area C, D and L. This is a net gain of the area C, D, F and G. With this increase in price the level of domestic production has increased from Y1 to Y3, while the level of imports has reduced to Y4 minus Y3. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ...


The government also receives an increase in revenues as a result of the tariff equal to the area D, E, H and I. In dollar terms this figure is essentially $10*(Y4-Y3). However, with this redistribution of surplus we do see that some of the redistributed consumer surplus is lost. This loss of surplus is known as a deadweight loss, and is essentially the loss to society from the introduction of the tariff. The deadweight loss is equal to the areas E, I and J plus D, G and H. The area D, G and H represents a loss in efficiency as domestic consumers end up with too little of the good. The area E, I and J represents a loss in efficiency as too much of the good is being supplied by the less efficient, domestic producers In economics, a deadweight loss (also known as excess burden) is a permanent loss of well being to society that can occur when equilibrium for a good or service is not Pareto optimal, (that at least one individual could be made better off without others being made worse off). ...


The model above is only completely accurate in the extreme case where none of the consumers belong to the producers group and the cost of the product is a fraction of their wages. If instead, we take the opposite extreme, and assume all consumers come from the producers group, and also assume their only purchasing power comes from the wages earned in production and the product costs their whole wage, then the graph looks radically different. Without tariffs, only those producers/consumers able to produce the product at the world price will have the money to purchase it at that price. The small FGL triangle will be matched by an equally small mirror image triangle of consumers still able to buy. With tariffs, a larger CDL triangle and its mirror will survive.


Note also, that with or without tariffs, there is no incentive to buy the imported goods over the domestic, as the price of each is the same. Only by altering available purchasing power through debt, selling off assets, or new wages from new forms of domestic production, will the imported goods be purchased. Or, of course, if its price were only a fraction of wages.


In the real world, as more imports replace domestic goods, they consume a larger fraction of available domestic wages, moving the graph towards this view of the model. If new forms of production are not found in time, the nation will go bankrupt, and internal political pressures will lead to debt default, extreme tariffs, or worse.


Moderate tariffs would slow down this process, allowing more time for new forms of production to be developed.


Infant industry argument

Some proponents of protectionism claim that imposing tariffs that help protect newly founded infant industries allows those domestic industries to grow and become self sufficient within the international economy once they reach a reasonable size. The infant industry argument is an economic reason for protectionism. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over...


Political purpose

The tariff is also used as a political tool to establish an independent nation. For example, the Tariff Act of 1789, signed specifically on July 4th, was called the "Second Declaration of Independence" by newspapers because it was intended to be the economic means to achieve the political goal of a sovereign and independent United States. The Hamilton Tariff of 1789 was one of the first bills established by the new United States government. ...


In a free market economic system, the tariff establishes the borders or boundaries of the system, because as defined by free market economics, the absence of tariffs is a requirement of a free market economic system. The establishment of tariffs create a border of protection around the free market economy, and within that free market area, no tariffs can be established.


The four requirements of a free market economic system, as defined by Ludwig Von Mises, are private property, a coersive government, the absence of institutional interferences within the system, and the division of labor.


Revenue argument

Critics of free trade have argued that tariffs are especially important to developing countries as a source of revenue. Developing nations do not have the institutional capacity to effectively levy income and sales taxes. In comparison with other forms of taxation, tariffs are relatively easy to collect. The trend of lifting tariffs and promoting free trade has been argued to have had disproportionately negative effects on the governments of developing nations who have greater difficulty than developed nations in replacing tariffs as a revenue source.[1]


United States

It has been suggested that Tariff in American history be merged into this article or section. ...

See also

General Agreement on Tariffs and Trade GATT The General Agreement on Tariffs and Trade (typically abbreviated GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATTs main objective was the reduction of barriers to international trade. ...

An import tariff or import duty is a schedule of duties imposed by a country on imported goods. ... This is a list of tariffs and trade legislation Canada 1855 - 1866 - Canadian-American Reciprocity Treaty 1857 - Cayley-Galt Tariff 1871 - The National Policy introduced 1945 - Bretton Woods Agreement 1947 - General Agreement on Tariffs and Trade 1963-1967 - Kennedy round of GATT 1965 - Auto Pact 1973-1979 - Tokyo round of... International trade - an overview Absolute advantage Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) APEC Autarky Balance of trade barter Bilateral Investment Treaty (BIT) Bimetallism branch plant Bretton Woods Conference Bretton Woods system British timber trade Cash crop Comparative advantage Continental trading bloc Cost, insurance and freight Currency... An import quota is a type of protectionist trade restriction that sets an upper limit on the quantity of a good that can be imported into a country in a given period of time. ... A trade barrier is general term that describes any government policy or regulation that restricts international trade, the barriers can take many forms, including: Import duties Import licenses Export licenses Quotas Tariffs Subsidies Non-tariff barriers to trade Most trade barriers work on the same principle: the imposition of some... For delayed access after publication, see Embargo (academic publishing). ... An excise is an indirect tax or duty levied on items within a country. ... The effective rate of protection is a statistic used by economists to measure the real protection yielded by import duties or tariffs. ... This article is one of a group being considered for deletion in accordance with Wikipedias deletion policy. ... There are very few or no other articles that link to this one. ...

References

  • Dominick Salvatore, Introduction to International Economics (2004)
  • Taussig, F.W. "Tariff," Encyclopedia Britannica (11th edition, 1911) vol 26 pp. 422-27.
  • Free Markets And Tariffs

External links


  Results from FactBites:
 
Tariff (disambiguation) - Wikipedia, the free encyclopedia (214 words)
Many tariffs have legal standing with regulatory agencies and may require approval by them.
For example, "A $127 tariff is levied on students residing at Fenner Hall".
tariff (criminal law) is a recommendation for the length of a prison sentence to be served before the prisoner is eligible for parole in British criminal law
Tariff - Wikipedia, the free encyclopedia (1517 words)
A tariff on coffee imports, for example (by a country that does not grow coffee) raises a steady flow of revenue.
Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy.
A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc.
  More results at FactBites »

 
 

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