When goods cross the customs territory of the state, payment of a number of taxes and fees is mandatory. One of such mandatory payments are customs duties.
Types of Fees
Customs duties are mandatory payments that are levied by the customs authorities at the time the product crosses the border of the country. Depending on how the tariff is calculated, they are divided into three types: ad valorem duty, specific and combined.
The method of charging is not the only sign by which classification is carried out. For example, on a target basis, duties are divided into fiscal and protectionist. In the first case, the main task of collecting a payment is replenishment of the state budget, in the second - the achievement of trade and political goals. As an example of the purpose of the application of protectionist duties, we can cite the stimulation and protection of producers within the state.
Also, duties can be import and export (import and export), depending on the object of taxation. The former are used much more often both in the Russian Federation and in the territories of other states around the world. They can be used to stimulate export activity. Duties on goods exported from the country are much less common. In the Russian Federation, they apply to exported raw materials. The World Trade Organization recommends that this type of payment be completely canceled. The ad valorem rate of customs duty can be applied to both export and import.
The essence of ad valorem tariffs
Ad valorem customs duties are payments, the amount of which is determined as a percentage of the customs value of exported / imported products. Such tariffs are practically not applied for the taxation of mass deliveries.
There are cases when ad valorem and specific duties can be used for taxation of goods. Such a tariff is called a combined tariff. Its essence lies in the fact that both principles are used to calculate the size, that is, a fixed rate and a percentage of the cost of production. The largest of the calculated monetary amounts is subject to payment.
The formula for calculating the ad valorem duty is as follows:
Tbut = TC x p = (C x K) x p, where:
- Tbut - size of ad valorem tariff;
- TS - customs value;
- C is the price of the goods;
- K is the amount of production;
- p - ad valorem rate.
Example of calculation of duties: combined and ad valorem
In more detail, the principle of tariff calculation should be disassembled using an example.
Calculation of ad valorem duty
Unit price is $ 11. The lot size is 17 thousand pieces. The ad valorem rate is 7 percent.
The first step is to calculate the customs value, which will be the basis for calculating the duty:
17,000 x 11 = 187,000 dollars.
The second step is to calculate the size of the fee:
187,000 x 7% = 13,090 dollars.
Thus, the ad valorem duty is 13 thousand and 90 dollars.
Combined duty calculation
The price for one unit of goods is 10 euros. A total of 5 thousand units of products are imported into the customs territory of the state. The ad valorem rate is 5 percent of the customs value; the size of a specific tariff is 50 eurocents per unit of goods.
First you need to calculate the amount of customs value:
10 x 5000 = 50,000 euros.
The next step is to calculate the ad valorem fee:
50,000 x 0.05 = 2500 euros.
Then you need to make a calculation of a specific tariff:
5000 x 0.5 = 2500 euros.
As you can see, in both cases the size of the fee is 2 thousand 500 euros. If the ad valorem rate was not 5, but 4 percent, then the amount of the duty would be:
50,000 x 0.04 = 2,000 euros.
In this case, the customs would still have to pay 2 thousand 500 euros, calculated at the rate of a specific duty.
Advantages and disadvantages of ad valorem duty
This type of tariff is often used for the imposition of expensive products. An example is the sale of computers. It is much more profitable to use the customs value of a PC as a base for taxation, rather than their weight or number of pieces.
Ad valorem rate is easy to calculate. It complies with all foreign trade standards and is recommended for use by the World Trade Organization. The duty rate reflects how protected the market is at the time of business negotiations, and it is also able to ensure stability in the domestic market when the value of goods changes.
The ad valorem tariff is able to provide an increase in the state budget with an increase in the cost of production (there is another side to the coin - a decrease in budget revenues with a decrease in the cost of goods).
Ad valorem duties allow minimizing losses on the condition of non-payment of payments, and also prevent the importation of low-quality goods.
The disadvantage of this type of tariffs is also present. It lies in the fact that the declarant declares the customs value, and if he understates the price, respectively, the tax amount will also be underestimated. Also, the rate is able to influence the amount of fees, which is a minus for the buyer of the goods and the final consumer.
Who sets ad valorem rates?
The size of bets is set at the legislative level. Ad valorem duty rates can range from 0 to 30 percent. The fixed rate applies to alcoholic beverages, sugar, caviar, as well as automobiles whose usage time exceeds five years.
In order to protect the interests of the domestic consumer or to stimulate export activity, the rate of ad valorem duties may vary. Often, raising or lowering rates is short-term in nature.
What affects ad valorem tariff?
The customs valuation of goods may have a noticeable effect on the size of the tariff due to the fact that it is subjective and may not correspond to real provisions. Also, the situation prevailing in the country at the political and economic levels can influence the rate of ad valorem duty.
The demand for tariffs drops significantly if prices decrease. Instability of income when using ad valorem duties reduces the level of protection of national markets. The tariff on the territory of the Russian Federation is calculated in rubles.