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Finance and Taxation
|Income tax · Payroll tax|
CGT · Stamp duty · LVT
Sales tax · VAT · Flat tax
Tax, tariff and trade
|Tax rate · Proportional tax|
Progressive tax · Regressive tax
Central bank · Money supply
Spending · Deficit · Debt
Tariff · Trade agreement
Financial market participants
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Public · Regulation
Full-reserve · Free banking
A tariff is a tax on 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. Smuggling, also known as trafficking, is the clandestine transportation of goods or persons past a point where prohibited such as out of a building into a Prison
Tariffs may be of various kinds:
The distinction between protective and revenue tariffs is: protective tariffs in addition to protecting local producers also raise revenue; revenue tariffs produce revenue but they also offer some protection to local businesses.
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. 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 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 Agricultural policy describes a set of laws relating to domestic Agriculture and imports of foreign agricultural products 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 trade bloc is a large Free trade area formed by one or more Tax tariff and trade agreements 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. 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. Poverty (also called penury) is deprivation of common necessities that determine the quality of life including food clothing shelter and safe Drinking water, and 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 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
Adherents of supply-side economics sometimes refer to domestic taxes, such as income taxes, as being a "tariff" affecting inter-household trade. Supply-side economics is an arguably heterodox school of Macroeconomic thought that argues that economic growth can be most effectively created using incentives for
Some economic theories hold that tariffs are a harmful interference with the individual freedom and the laws of the free market. Economics is the social science that studies the production distribution, and consumption of goods and services. Freedom, or the idea of being free is a broad concept that A free market is a Market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers 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. Free trade is a system in which the trade of goods and services between or within countries flows unhindered by government-imposed restrictions
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 Economics, economic equilibrium is simply a state of the world where economic forces are balanced and in the absence of external influences the (equilibrium values of economic 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. The term surplus is used in Economics for several related quantities The term surplus is used in Economics for several related quantities 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. In Economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable 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).
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.
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. For the protectionist Australian political party from the 1880s to 1909 see Protectionist Party
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 coercive government, the absence of institutional interferences within the system, and the division of labor. You wish though because this editing tariff may cause discrepancies among opposing countries.
The tariff has been used as a political tool to establish an independent nation; for example, the United States 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 (ch 2, enacted 1789-07-04) was the second statute ever enacted by the new United States government.
In modern times, the political impact of tariffs has been seen in a positive and negative sense. The 2002 United States steel tariff imposed a 30% tariff on a variety of imported steel products for a period of three years. The Section 201 steel tariff is a political issue in the United States regarding a Tariff that President George W American steel producers supported the tariff, but the move was criticised by the Cato Institute. The Cato Institute is a Libertarian Think tank headquartered in Washington D
Tariffs can occasionally emerge as a political issue prior to an election. An election is a Decision-making process by which a population chooses an individual to hold formal office In the leadup to the 2007 Australian Federal election, the Australian Labor Party announced it would undertake a review of Australian car tarrifs if elected. Federal elections for the Parliament of Australia were held on Saturday 24 November 2007 after a 6-week campaign in which 13 The Liberal Party made a similar commitment, while independent candidate Nick Xenophon announced his intention to introduce tariff-based legislation as "a matter of urgency"
Critics of free trade have argued that tariffs are especially important to developing countries as a source of revenue. The Liberal Party of Australia is an Australian political party. Nicholas (Nick Xenophon, originally Nicholas Xenophou, (born 29 January 1959 in Adelaide) is a South Australian barrister anti-gambling 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.