Difference Between Duties and Tariffs (With Table)

Buying any product does not just involve giving money and taking the product. There are lot more processes behind the scene. Before a product comes into the market for selling, there are different prices included in the cost of the product.

The amount is taken by the government for goods and services, which is called ‘tax.’ Tax is imposed by the government in various forms as direct tax and indirect tax. Direct tax is called a tariff, while indirect tax is taken as a duty.

Duties vs Tariffs

The difference between Duties and Tariffs is that Duties are the indirect tax imposed by the Government on the consumer. On the other hand, Tariffs are the direct tax applied to goods imported from a different country. These taxes help domestic industries to grow.

Duties are imposed on the goods of a single person who brings in something from another country. These taxes are collected to protect the industries of the country. Types of duties include anti-dumping taxes, trade tariffs, export duties, and excise duties. These are levied in the form of import duties, which are applied to goods entering the country.

Tariffs can be understood as a hurdle on the free trade between two countries. It is the amount which a country should pay either for export or import for the trading of products. Tariffs are mostly imposed on imported goods and hardly on exported goods. That’s why consumers have to pay extra costs for imported items. So, the government earns with this, and the GDP of the country increases.

Comparison Table Between Duties and Tariffs

Parameters of Comparison Duties Tariffs
DescriptionDuties are the indirect taxes imposed by the government on commodities, financial transactions, goods, and services, imported or exported.Tariffs are the direct taxes imposed by the government on imported or exported goods and services.
TypesExcise duty, customs duty, stamp duty, education cess.Specific tariff, Ad Valorem tariff.
NatureIndirect in nature as different taxes are included in the final price of a good.Direct in nature as tariff rates are fixed on goods being imported.
Types of GoodsDuties are collected on imported, exported, and goods that are manufactured in the country.Tariffs are collected on imported and exported goods.
BenefitThe government is benefited, which helps in increasing the economy of the country.The government and the country are benefited.

What are Duties?

Duties are the taxes imposed by the government on the company and individual that sends or receives goods from one country to other and also on the goods manufactured in the country, varying from country to country and product to product. Duties are imposed to raise the revenue of a country by protecting domestic industries from foreign competition. Two of the types of duties are excise duty and customs duty. 

Excise duty is imposed on the goods that are manufactured locally. It is imposed in addition to indirect tax, so the manufacturer or seller who pays excise duty tries to recover the loss by increasing the price of goods that are paid by the customer.

Customs duty is an indirect tax that is imposed on a consumer who imports goods. It is imposed by the government to support local industries. It is levied by customs on goods that are imported, based on weight, value, dimensions, etc., and varies by product to product and country in which it is manufactured. Custom duty is further divided into basic duty, countervailing duty, anti-dumping duty.

What are Tariffs?

Tariffs are the taxes that are imposed when goods and services are imported by the government. Tariffs are levied because the government does not want the economy of its country to be less competitive with other countries. 

Tariffs increase the price of the goods being imported, and hence due to increased price, imported goods are less desirable. Because of the increase in the price of goods, more domestic companies will manufacture the goods. This will protect the domestic industries, and thus, people can buy products at cheaper rates than imported ones.

Different types of tariffs are imposed by the government, but the two important and regularly applied tariffs are Specific tariffs and the Ad Valorem tariff. A specific tariff is a fixed tariff on one unit of goods imported and varies by the type of good. Ad Valorem tariff is the certain percentage of a tariff that is calculated on the total value of imported goods.

Main Differences Between Duties and Tariffs

  1. Duties are the taxes collected by the government on import and export goods. While tariffs are the taxes that are levied on imported goods.
  2. Duties are imposed as indirect taxes as they are being added after adding the cost of products. Tariffs are the direct taxes, and imported goods are classified under HTS, i.e., harmonized tariff system codes. HTS codes determine the tariff rate.
  3. Tariff rates are decided by the government according to which duties are collected as the amount on the goods being imported and exported.
  4. Two major types of duties are customs duty and excise duty, whereas two major types of tariffs are specific tariff and ad valorem tariff.
  5. Duties may vary between 0% to 100%, while tariffs can be calculated by dividing total tariff revenue by the total value of imports.

Conclusion 

Whether a country is developed or developing, its government has to decide the way to run an economy. The collection of tax is one of the primary sources to grow a country’s economy. Taxes that are collected are also of different types as to how the government levies them on goods and services.

Two of them are duties and tariffs, which have a difference of thin line. Duties are indirectly imposed while tariffs are directly imposed. 

Government imposes a tax in different forms like a tax on goods (being imported or exported), income and services. Limit is decided so much so that there should be a balanced economy. Government makes welfare schemes by the distribution of wealth to give everyone an equal opportunity for getting an education, food, shelter, road, et

References

  1. https://www.sciencedirect.com/science/article/pii/S0022199601001350
  2. https://www.journals.uchicago.edu/doi/abs/10.1086/259085
  3. https://www.sciencedirect.com/science/article/pii/S0022199605000589

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