Duties and tariffs are both forms of taxes that are imposed on the import and export of goods to and from foreign countries. Since both are taxes, they are not voluntarily offered and are usually forced onto businesses and individuals. Duties and tariffs are quite similar to one another in their purposes and features, and the two terms are often used interchangeably. The article offers a clear explanation on each term and shows the major similarities between duty and tariff.
Duty
Duties are taxes that are levied by the government on goods that are imported into and exported from a country. Duties are imposed on certain types of goods and services, and the duty that applies to the good or service will vary with the nature of the goods being imported or exported. For example, the duty that applies to cigarettes, alcohol and vehicles maybe higher than the duty imposed on clothing, shoes, and towels. Import duties are paid to obtain permission from the country’s customs authority to import goods or services from other countries.
Duties are imposed for a number of reasons. The government could be trying to protect the economies domestic producers and small and medium enterprises from external competition. When duties are imposed, exported products become more expensive, and local products become more attractive to consumers. Another reason for import duties is to discourage imports. Imports can result in a balance of payments deficit, which is not healthy for a country’s economy. By imposing duties, the volume of imports can be reduced. However, the disadvantage in taking this measure is that countries may retaliate and in turn impose duties on their imports which will reduce a country’s export income.
Tariff
Tariffs are also taxes that are levied on goods and services that are imported to a country. Tariffs are used to amend trade policies by reducing the volume of imports through making imports expensive. Tariffs are imposed to collect government income, protect domestic small and medium firms and to reduce trade deficits. However, tariffs have some disadvantages. When tariffs are imposed on imported products, the local producers do not face much competition and will, therefore, become inefficient. Tariffs act as a safety bubble for these firms and, as long as tariffs are imposed, local industries will not strive to improve quality or reduce cost as much as exported products. Furthermore, tariffs are generally imposed only on imported goods and quite rarely on imported products.
What is the difference between Duty and Tariff?
Duties and tariffs are both taxes that a country’s government will impose on the import and export of goods and services. These terms are quite similar to one another and are most often used interchangeably. Both tariffs and duties are imposed for the same purposes which are to protect domestic industries and companies, earn government income, and reduce trade deficits. A duty can also refer to customs duty that is imposed on goods that are brought into a country by tourists and other individuals. While duties and tariffs can be beneficial to a country, there are also a few disadvantages. The main issues with these taxes are that they protect local producers too much, and by not exposing domestic producers to international competition, they will remain within the same quality standards and inefficiencies, and the industry as a whole will remain underdeveloped in comparison to more efficient foreign industries.
Summary:
Duty vs. Tariff
• Duties and tariffs are both forms of taxes that are imposed on the import and export of goods to and from foreign countries.
• Both tariffs and duties are imposed for the same purposes which are to protect domestic industries and companies, earn government income, and reduce trade deficits.
• Duties and tariffs are quite similar to one another, and these terms are most often used interchangeably.