Common to most European languages, the word for customs duties is tariff. In Russian, it is used, as a rule, in a different context and with a different meaning, however, its history must be known in order to understand what customs duty is.
The small Spanish city of Tarifa is sometimes credited with the origin of the word "tariff", as it was the first port in history to accuse merchants of using its docks. The name "Tarifa" comes from the name of the Berber warrior Tarifa ibn Malik. However, other sources suggest that the source of the word is the Italian word tarifa, translated as “price list, betting book”, which, in turn, comes from the Arabic expression ta'rif, meaning “announcement” or “definition”.
Definition
What is customs duty? Customs duty is an indirect tax levied on the import or export of goods in international trade. In an economic sense, they are also a type of consumption tax. The amount charged on imported goods is called import duty. Similarly, an export duty is called an export duty. Domestic customs duties, however, involve the collection of money for the import of goods into another administrative entity within one state. This is a very archaic phenomenon for the modern world.
Payment
In order to understand what customs duty is, you need to understand how it is determined in monetary terms. The duty is calculated on the basis of determining the estimated value of those goods for which an ad valorem duty is levied. This amount is often a transaction value if the customs authority does not determine the estimated value in accordance with the Harmonized System. For certain goods, such as oil and alcohol, the customs duty is carried out at a certain rate applicable to the volume of imported or exported goods.
In Russia, import duties are approved by the Council of the Eurasian Economic Union, while export duties are approved directly by the Russian government. These bodies decide everything related to the application of customs duties. Import duties are calculated on the basis of the Unified Customs Tariff, which is a set of duty rates for goods imported into the Customs Union from other countries.
Export duties are calculated in accordance with the rates adopted by the Russian government in Decree No. 754. The size of the customs duty depends on the cost of the goods themselves, as well as rates adopted in a particular country (in our case, in Russia). In other states, a practically similar scheme operates.
Customs duties of the Russian Federation
The main document in Russia governing the payment of this type of tax is the Customs Code of the Customs Union. It also describes what customs duty is in terms of Russian law. This document should be known to all domestic customs officers.
With the calculation of customs duties, everything is not as difficult as it might seem at first glance. These calculations are always carried out according to simple standardized schemes and formulas, for the use of which it is not necessary to master mathematics. The initial rate of import customs duty is the amount fixed in the Single Tariff, which applies to goods imported from 130 countries with which our country is in the so-called "most favored nation treatment" - in other words, we are talking about military allies and major trading partners .
Some politicians believe that trade preferences harm the Russian economy, and duties should be imposed against all countries with which Russia trades. Others, on the contrary, are convinced that the future of our economy is in completely duty-free trade.
Role in the Russian economy
It should be noted that, despite the support of the basic principles of free trade and membership in the WTO, the Russian economy is well enriched by duties. For example, in 2014, the volume of revenue from duties amounted to more than half of the revenues to the Russian budget. If most Western countries use this import tax as a weapon in trade wars or as a means to protect domestic producers, then for Russia this is also an extremely serious source of income.
Ad valorem rate
There are two types of bets of this kind:
- Export rate determined by the decree of the Russian government No. 191.
- Import rate determined by a specialized agreement concluded between the countries of the Customs Union and determining the customs value of goods.
Ad valorem calculation
Rates of this kind are calculated according to a simple formula: STP = TS? SP.
STF in this formula is the value of the initial customs duty, TS is the value of the goods, and JV is the customs duty rate. A question mark denotes a mathematical action that must be performed depending on the situation, whether it is addition, division, multiplication, etc.
Specific rate
The peculiarity of this rate is that it depends on the characteristics of the product to which it is applied. It is calculated by a special formula: STP = ФХ? СП? КВ
The decoding of the formula is as follows:
- STP - amount of duty;
- FH - product characteristics - usually physical;
- SP - rate in foreign currency;
- KV - the rate of this very currency, set by the Central Bank of Russia at the time of filing a specific customs declaration;
- ? - the necessary mathematical action (multiplication or division).
Combined rate
The combined bet has the characteristics of all previous types of bets. That is, in its pure form, this is an ad valorem rate to which additional amounts may be added, depending on certain characteristics of the goods.
Varieties of duties
There are three special types of customs duties:
- Special. Their main function is to protect the domestic market from excessive imports by certain states. They consist in setting excessive rates for strictly defined groups of goods.
- Antidumping. Everything is clear from the name - these rates are introduced in order to prevent the dumping policy, which is abused by some producing countries. Dumping is an artificial understatement of the price of goods, due to which the exporting country seeks an advantage over its competitors. For example, China, the main producer of cheap goods in the world market, is often blamed for dumping. Countries wishing to protect the domestic market from the influx of cheap Chinese products impose these duties on China.
- Compensatory. These are additional duties that are levied on products imported from a particular state in order to reduce its competitiveness and, thus, protect domestic producers. The decrease in competitiveness occurs precisely due to the fact that the exporting state, not wanting to pay countervailing duties, reduces the amount of products taxed by this tax, and thus this small product is “dissolved” in the market of the importing country, without posing any threat to domestic manufacturers.
Tax evasion
Evasion of state customs duties occurs mainly in two ways. In one of them, the exporter writes the value in such a way that the estimated value is lower than the actual value. In a similar vein, the exporter may evade customs duties by underestimating the quantity or volume of the product of trade. Customs duties and fees are of great importance for the economies of protectionist countries, because the punishment for them is rather serious evasion.
Duty Free Products
Many countries allow you to import goods duty free.These goods can be bought at ports and airports, and sometimes in one country, without resorting to the usual state duties, and then transported to another country duty free. Some countries charge bonuses that limit the quantity or value of duty-free items that one person can bring to the country. These restrictions often apply to tobacco, wine, spirits, cosmetics, gifts, and souvenirs. Often, foreign diplomats and UN officials are entitled to duty-free goods. Duty-free goods are imported and stored in the so-called customs warehouse.
Fees for companies in real life
In addition to difficulties in settlement, problems arise in the analysis of duties, and company heads have to turn to duty-free tools, such as using a customs warehouse.
Companies use ERP software to automatically calculate customs duties to, on the one hand, avoid error-prone manual work according to the rules and calculation formulas, and on the other hand, do without the services of paid accountants. In addition, ERP software offers an option for a customs warehouse, introduced to save duty and VAT payments. In addition, such programs take into account deferral and suspension of duties.
Evaluation of economists
Neoclassical economic theorists tend to view the use of customs duties as a gross violation of free trade. Studies show that duties generally benefit domestic producers and the government at the expense of consumer interests, and that the economic impact of duties on the importing country is negative. These conclusions often lead to normative judgments, namely, that it might be unprofitable for a country to artificially protect industry from world markets and that it would be better to allow completely free trade by abandoning protectionism. Liberals traditionally oppose all types of customs duties, as if standing up for the interests of consumers.
Customs duties generally reduce welfare, and this is not new to economists. For example, the University of Chicago surveyed about 40 leading economists in March 2018, asking: “Will setting new US tariffs on steel and aluminum improve American welfare?” About two-thirds of the economists surveyed strongly disagreed with the statement, while one-third expressed moderate disagreement. None of them agreed with Trump's trade policies characterized by protectionism. Some noted that such tariffs will help several percent of Americans at the expense of everyone else. This is consistent with the above explanation, which is that losses for domestic consumers outweigh the benefits for domestic producers and the government. Duties are even less effective than consumption taxes.
For economic efficiency, free trade is often the best policy, but levying sometimes takes second place.
Optimum duty
The duty is called optimal if it is configured to maximize the welfare of the country that introduces it. This duty is obtained by crossing the trade indifference curve of this country and the supply curve of another country. In this case, the welfare of another country is deteriorating in the same way, so politics is a kind of form of trade war between two dysfunctional countries. Current economists, however, believe that fees in any form adversely affect the welfare of the country that introduces them.
Fees and politics
You can look at this problem from a political point of view and consider the theoretical optimal rate of customs duty.When countries introduce duties against each other, they reach a position on the curve of the contract, which indicates a combination of trade values that satisfy each other's maximum well-being, while countries sell their own goods to each other.
Customs duties were often used as a political tool in creating an independent country. For example, the United States Duty Act of 1789, signed specifically on July 4, was called by the newspapers the “Second Declaration of Independence” because it was designed to achieve the political goal of sovereign and independent United States.
The political influence of duties is evaluated depending on the political perspective. For example, in 2002, the United States imposed a 30% duty on various imported steel products for a period of three years, and American manufacturers supported this government policy. At the same time, the rates of import customs duties on many goods have increased many times over.
Fees may arise as a political issue before the election. On the eve of the 2007 Australian federal election, the Australian Labor Party announced that if elected, it would consider imposing duties on foreign car manufacturers. The Liberal Party made a similar promise, while independent candidate Nick Xenophon announced his intention to introduce fee-based legislation as a “matter of prime necessity”.
Unpopular duties are known to cause social unrest, such as the 1905 meat riots in Chile, which developed in protest of the duties applied to importing cattle from Argentina.
The Russian Federation, in turn, prefers not to impose high duties against unfriendly countries and not to unleash trade wars. However, as mentioned above, they are a great source of income for the economy of our country.
As part of Donald Trump's economic policy
"Trump Tariffs" is a series of customs duties introduced during his presidency. Prior to this, the customs duties of the country were not so high, because the United States is known as the global mouthpiece of free trade. The vast majority of economists rated them negatively: almost 80% of the 60 economists surveyed by Reuters believe that duties on imports of steel and aluminum will be pure damage to the US economy, while others believe that they will have little or no effect at all. to the economy. None of the economists surveyed believed that duties would be useful for the US economy.
Nevertheless, the trade war between the United States on the one hand and China and Turkey on the other flared up in full. Thousands of large-scale duties were levied on thousands of Chinese products imported into America. Turkish steel, in turn, was also imposed by them, which provoked an unprecedented crisis in the Turkish economy. Fortunately, Russia only benefits from this trade war, because China and Turkey, having become disillusioned with their once main trading partner, will inevitably turn their eyes to our country.