abhishreshthaa
Abhijeet S
CLASSIFICATION OF TARIFFS
C. On The Basis Of Purpose They Serve:
Here, the tariffs are classified into the following four categories:
1. Revenue Tariff: Revenue tariff aims at collecting substantial revenue to the government. It is usually imposed on items of mass consumption but the rate of duty may be low. Revenue tariffs are fairly low and they do not obstruct the free flow of imports.
They do not restrict imports appreciably. However, govt. may impose heavy import duty on luxury goods foe collecting huge revenue. It may be noted that a pure revenue tariff is rarely introduced.
It is accompanied by other objectives like discouraging imports or giving protection to home industries.
2. Protective Tariff: Protective Tariff aims at giving protection to domestic industry by resulting or eliminating the competition. The rate of protective duty is usually high as imports can be reduced or discouraged only when the burden of duty is substantial.
The purpose of protective tariff is to restrict imports and thereby to keep home market easily available to domestic industries.
3. Anti-Dumping Duties: Dumping is a commercial practice of selling goods in foreign market at a price below their normal price or even below their marginal cost so as to capture foreign markets.
Dumping practice is followed by many countries particularly by developed countries. Dumping when followed by large number of countries is called international dumping.
The purpose is to capture foreign markets initially at a loss and then to have good profit in the long run by raising prices. It is harmful to less developed countries where the cost of production is normally high.
Heavy duties penalties are imposed so as to remove the effect of dumping. The result is:
a) Government Gets Revenue,
b) The Imported Goods Become Costly,
c) Imports Are Discouraged.
Here, protection is given to home industries indirectly.
4. Countervailing Tariffs or Duties: Countervailing duties are to some extents are similar to anti dumping duties but they are not severe like anti dumping duties.
In some countries cash assistance or subsidies is given by the government for making the domestic goods cheaper or competitive in foreign markets. Countervailing duties are imposed to nullify the benefits of cash assistance or subsidies. The rate of such duty will be similar to the cash assistance given.
C. On The Basis Of Purpose They Serve:
Here, the tariffs are classified into the following four categories:
1. Revenue Tariff: Revenue tariff aims at collecting substantial revenue to the government. It is usually imposed on items of mass consumption but the rate of duty may be low. Revenue tariffs are fairly low and they do not obstruct the free flow of imports.
They do not restrict imports appreciably. However, govt. may impose heavy import duty on luxury goods foe collecting huge revenue. It may be noted that a pure revenue tariff is rarely introduced.
It is accompanied by other objectives like discouraging imports or giving protection to home industries.
2. Protective Tariff: Protective Tariff aims at giving protection to domestic industry by resulting or eliminating the competition. The rate of protective duty is usually high as imports can be reduced or discouraged only when the burden of duty is substantial.
The purpose of protective tariff is to restrict imports and thereby to keep home market easily available to domestic industries.
3. Anti-Dumping Duties: Dumping is a commercial practice of selling goods in foreign market at a price below their normal price or even below their marginal cost so as to capture foreign markets.
Dumping practice is followed by many countries particularly by developed countries. Dumping when followed by large number of countries is called international dumping.
The purpose is to capture foreign markets initially at a loss and then to have good profit in the long run by raising prices. It is harmful to less developed countries where the cost of production is normally high.
Heavy duties penalties are imposed so as to remove the effect of dumping. The result is:
a) Government Gets Revenue,
b) The Imported Goods Become Costly,
c) Imports Are Discouraged.
Here, protection is given to home industries indirectly.
4. Countervailing Tariffs or Duties: Countervailing duties are to some extents are similar to anti dumping duties but they are not severe like anti dumping duties.
In some countries cash assistance or subsidies is given by the government for making the domestic goods cheaper or competitive in foreign markets. Countervailing duties are imposed to nullify the benefits of cash assistance or subsidies. The rate of such duty will be similar to the cash assistance given.