Tax and Duty as the Main Economical Terms

In economics, a duty is a kind of tax, often associated with customs, a payment due to the revenue of a state, levied by force of law. It is a tax on certain items purchased abroad. Properly, a duty differs from a tax in being levied on specific commodities, financial transactions, estates, etc., and not on individuals. Thus it is right to talk of import duties, excise duties, death or succession duties, etc., but not of income tax as being levied on a person in proportion to his income.

Customs duty is a kind of indirect tax which is levied on goods of international trade. In economic sense, it is also a kind of consumption tax. Duties levied by the government in relation to imported items are referred to as import duties. In the same vein, duties levied on export consignments are called export duties. Tariff, which is actually a list of commodities along with the leviable rate (amount) of Customs duty, is popularly understood as Customs duty.

Calculation of Customs duty depends on the determination of what is called assessable value in case of items for which the duty is levied ad valorem. This is often the transaction value unless the Customs officers determine assessable value in accordance with Brussels definition. However, for certain items like petroleum and alcohol, Customs duty is levied at a specific rate applied to the volume of the import or export consignments.

For the purpose of assessment of Customs duty, products are given an identification code that has come to be known as the Harmonized System (HS) code. This code has been evolved and assigned by the World Customs Organization based in Brussels. HS Code may be from four to ten digits.

Introduction of HS Code in 1990s has largely replaced what used to be known as SITC or Standard International Trade Classification, though SITC remains in use for statistical purposes. In drawing up the national tariff, the revenue department often specifies the rate of Customs duty with reference to the HS Code of the product. In some countries and customs unions, 6-digit HS codes are locally extended to 8 digits or 10 digits for further tariff discrimination: for example the European Union uses its 8-digit CN (Combined Nomenclature) and 10-digit TARIC (Integrated Tariff of the European Community) codes.

The national authority that is entrusted the task of levying taxes on international trade is often referred to as Customs department. Normally the Customs department operates under a national law and is authorized to examine the cargo in order to ascertain actual description, specification volume or quantity, so that the assessable value and the rate of duty may be correctly determined and applied.

Evasion of Customs Duties takes place mainly in two ways. In one, the trader under-declares the value so that the assessable value is lower than actual. In a similar vein, a trader can evade Customs duty by understatement of quantity or volume of the product of trade. Evasion of Customs duty may take place without or in collaboration of Customs officials. Evasion of customs duty does not necessarily constitute smuggling.

Duty-free is the term that is often used to describe goods bought at ports and airports that do not attract the usual government taxes and customs duties. Some countries impose allowances in order to restrict the number of Duty-free items that one person can import into the country. These restrictions often apply to tobacco, wine, spirits, eau de toilette, gifts and souvenirs. Often foreign diplomats and UN officials are entitled to Duty-free goods. Duty-free goods are imported and stocked in what is called bonded warehouse.

 

Exercise 4.Consult the text and find the English equivalents to the word combinations.

1. беспошлинные товары; 2. норма, квота; 3. сговор, участие; 4. исчисление таможенного налога; 5. хранить, складировать; 6. занижение, замалчивание; 7. продолжать, сохранять; 8. десятизначный; 9. передавать, поручать; 10. устанавливать, определять.

Exercise 5.Decide whether the following statements are true or false. Correct the false ones.

1. Customs duty is a kind of direct tax. 2. All countries and customs unions use its 8-digit Combined Nomenclature. 3. Customs duty is realized on goods of international trade. 4. All European countries try to limit the number of duty-free items that one person can import into the country. 5. Evasion of customs duty constitutes smuggling.

 

Exercise 6.Answer the following questions.

1. What is a duty? 2. Who or what can levy duties? 3. What is the difference between a tax and a duty? 4. What types of duties are there? 5. Where was the Harmonized System code signed? 6. How many ways are there to avoid paying Customs Duties? 7. What are the main kinds of duty-free products? 8. What does calculation of Customs duty depend on? 9. Is the income tax a kind of customs duty? 10. How is a duty realized on export consignments called?

Exercise 7.Give a short summary of the text.

Exercise 8.Now read and translate the text about customs tariffs. Use the dictionary when necessary.

Tariff

Tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes because their predominant purpose is not financial but economic – not to increase a nation’s revenue but to protect domestic industries from foreign competition. For that reason, protective tariffs, as they are often called, are opposed by advocates of free trade.

Taxes are levied upon goods as they cross national boundaries, usually by the government of the importing country. The words tariff, duty, and customs are generally used interchangeably. Usually assessed on imports, tariffs may apply to all foreign goods or only to goods produced outside the borders of a customs union. A tariff may be assessed directly, at the border, or indirectly, by requiring the prior purchase of a license or permit to import specified quantities of the goods. Examples of tariffs include transit duties and import or export taxes, which may be levied on goods passing through a customs area en route to another destination. In addition to providing a source of revenue, tariffs can effectively protect local industry by driving up the price of an imported item that competes with domestic products. This practice allows domestic producers either to charge higher prices for their goods or to capitalize on their own lighter taxes by charging lower prices and attracting more customers. Tariffs are often used to protect “infant industries” or to safeguard older industries that are in decline. They are sometimes criticized for imposing hidden costs on domestic consumers and encouraging inefficiency in domestic industries. Tariffs are subject to negotiation and treaties among nations.

Those customs duties that are still imposed today are usually either one of two types – specific duty, a tax levied on the quantity, whether by weight, size, or number, of the goods; or ad valorem duty, a percentage of the foreign or domestic price. The ad valorem duty is generally considered to be preferable but more difficult to levy, requiring complex procedures to determine the value of goods. Specific duties are best applied for protectionist purposes, since their size varies inversely with the prices of imports. For example, an import taxed at $5 per ton, and costing $100 per ton, may have an effective duty of 5%. However, if its price drops to $80 per ton – a threat to domestic producers – the effective duty may rise to more than 6%. Certain tariffs are also designed to offset dumping.

Tariffs have been used by governments since ancient times, although they were originally sources of revenue rather than instruments of state economic policy. Early customs duties consisted of payments for the use of trade and transportation facilities, including ports, markets, streets, and bridges. By the 17th century, however, they came to be levied only at the boundary of a country and usually only on imports. At the same time, European powers established special low tariff rates for trade with their possessions; such systems of colonial preference formed the basis of the trading patterns that developed in the 17th and 18th centuries.

Although the free trade movement in the early 19th century discouraged the use of tariffs, a new system of trade relations known as imperial preference developed in the late 19th century. Great Britain and France, in particular, used preferential tariffs to organize the flow of foodstuffs and raw materials from their colonial dependencies and to regulate the export of domestic manufactured products into those areas. Other European nations retaliated by raising their tariffs, and a period of relatively high protective tariffs lasting through the Great Depression followed.

Since World War II the trend has been away from tariffs and in favor of freer trade. Through instruments such as the most-favored-nation clause and the reciprocal trade agreement, two nations may agree to lower their respective tariff barriers. More comprehensive agreements, such as those of the European Union and other customs unions, lower or even eliminate tariffs among groups of nations. Finally, the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), have since the 1950s sponsored a number of initiatives for lowering the customs duties of most major trading nations. The United States has participated in the movement toward free trade by lowering its customs duties from the high rates of the Hawley-Smoot Tariff Act (1930); by playing an instrumental role in the several GATT tariff initiatives, including the Uruguay round (1986–93), which created the WTO; and by signing (1992) the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Exercise 9.Choose the right answer.

1. What is the main goal of tariff imposing?

a) to increase a nation’s revenue;

b) to protect local industries from foreign competition;

c) to protect the interests of citizens;

d) to give more opportunities for the participant of foreign trade.

2. What is the most suitable synonym to the word “tariff”?

a) duty; b) customs; c) excise; d) duty-free.

3. Where can we find tariffs as a subject?

a) in the mass-media debates; b) in the newspapers’ and magazines’ headlines;

c) in the election campaign; d) in the international negotiations and treaties;

4. What disadvantage does the ad valorem duty have?

a) it is not precise; b) it is difficult to levy;

c) it is not modern; d) it is complicated to calculate.

5. What are the tariffs often criticized for?

a) for imposing high costs on foreign consumers; b) for promoting duty-free shops;

c) for levying hidden costs on domestic consumers; d) for maintaining foreign traders.

6. Since when have tariffs been known as a governmental policy?

a) since ancient times; b) since World War II;

c) since the Great Depression; d) since the 19th century.

7. What was imposed with customs duties?

a) using of modern equipment in the apartments;

b) using of trade and transportation facilities;

c) using of imported and exported goods;

d) using of convicts and migrant workers labor.

8. Who began to use preferential tariffs and when did it happen?

a) Great Britain and France, in the late 19th century;

b) European countries, after the World War II;

c) USA, after the Great Depression;

d) developed countries, in the late 19th century.

9. What tendency has occurred in the tariff policy since World War II?

a) elimination of tariffs policy; b) removal from tariffs;

c) avoidance of customs duties payment; d) increasing of tariffs.

10. Why did Great Britain and France use preferential tariffs?

a) to eliminate the trade relations with their colonies;

b) to regulate the export of raw materials;

c) to maintain export of products;

d) to improve import of raw materials.

Exercise 10.Translate the following terms into Russian. Give your own definitions (in English) and learn these terms by heart.

1. a tariff; 2. domestic industry; 3. foreign competition; 4. preferential tariffs; 5. free trade; 6. ad valorem duty; 7. specific duties; 8. hidden costs; 9. dumping; 10. tariff rates.

Exercise 11. Write an outline of the text.

 

COMPREHENSION

Exercise 12.Fill in the table. Add two more categories for comparison.

  Tax Customs duty
Subject    
Object    
Goals    

Exercise 13. Fill in the gaps using the words given below, and translate the sentences into Russian.

tariffs domestic industries assessable commodities TARIC data

trend foreign competition financial transactions design

value eliminate

1. America wants to … tariffs on items such as electronics. 2. This Ministry has been responsible not only in the areas of exports and imports but also for all … and businesses. 3. The UK Tariff consolidates UK specific data with the EU … . 4. The State Wisconsin is losing manufacturing employment in the wood furniture industry due to … . 5. According to expert opinion, gold tends to go up in … over the long term. 6. Can Green Trade … сombat сlimate сhange? 7. This … allows developing countries to support their farmers. 8. The International Trade Centre will … and implement such projects in the future. 9. What measures are taken against persons involved in suspect … ? 10. Do you have any … ?

 

Exercise 14. Replace the underlined words with the synonymous terms from the texts.

1. This country supported the initiative to decrease the customs tariff. 2. All Member States have an obligation to promote and safeguard human rights and fundamental freedoms and the duty to fulfill the obligations that they have undertaken under the various international instruments. 3. What is the main aim of using preferential tariffs? 4. Any good generally acceptable in exchange should be called money. 5. Because of unforeseen circumstances, he has not been able to fully pay its contributions. 6. You have to declare any chargeable goods by crossing state boundaries. 7. This tariff was levied to bolster home industries. 8. Mutual trade agreement has recently been made. 9. Every backward country can get away foreign competition by means of its customs system. 10. When a country adopts a tariff, the tendency for the level of prices is to rise.

 

Exercise 15.a)Match the verbs on the left with the nouns on the right.

1. to specify a) in two ways;
2. to operate b) tax avoidance;
3. to take place c) the rate of Customs duty;
4. to stock d) special low tariff rates;
5. to cross e) local industry;
6. to protect f) an international treaty;
7. to establish g) under a national law;
8. to sign h) free trade;
9. to limit i) national boundaries;
10. to prevent j) in the bonded warehouse.

b)In the sentences below replace the Russian expressions with the phrases you have got. Use these expressions in the necessary form.

1. Customs legislation (определяет) precisely (размер таможенной пошлины). 2. Many currency traders (действуют, опираясь на федеральный закон). 3. These changes (проходят в двух вариантах). 4. As they had to (хранить) their merchandise (на таможенном складе) their costs were increased. 5. The river (пересекает национальную границу), that is why it is used by the smugglers for illegal trafficking of people. 6. Almost half the labor force is unemployed; and local authority does all its best to (защитить местную промышленность) in order to avoid the collapse. 7. After the agreement (специальные пониженные тарифы будут установлены) for both sides. 8. Although all states indicated the intention (подписать международный договор) it still was not done. 9. If the developed countries (ограничат беспошлинную торговлю) the economic situation in the developing counties could improve. 10. Parliament (предотвращает уклонение от уплаты налогов) by issuing new legislation acts.

WRITING AND COMMUNICATION

Exercise 16.Write an essay on the given topics and discuss it with your partner.

1. Tax, duty, tariff: similarity and differences.

2. Tax, duty, tariff: modern international trends.

Exercise 17.Translate the following sentences from Russian into English.

1.Внутренняя торговля, обмен отечественными товарами в пределах границ страны, часто противопоставляется международной торговле. 2. Многие европейские страны импортировали сырье из своих колоний в 19 веке. 3. В настоящее время подписывается много международных договоров, позволяющих увеличивать товарооборот между странами. 4. Правительство Англии всегда считало, что для ликвидации экономических трудностей необходимо устранять не только симптомы, но и причины этих явлений. 5. Таможенная служба должна предоставлять любую важную информацию импортерам, экспортерам, таможенным брокерам, юристам. 6. Однажды так случилось, что мне пришлось пересечь три границы за один день. 7. Страны, входящие в ЕС, стараются уменьшить таможенные тарифы среди государств. 8. В зависимости от размера заниженной суммы, любой может понести административную или уголовную ответственность. 9. Новую партию товара доставят только через неделю или две, так как из-за праздничных и выходных дней процедура таможенного оформления затягивается. 10. В этой области была введена система, при которой нефтяники получали льготные таможенные пошлины, если заказывали оборудование на местных заводах.

 

PROJECT WORK

Study the main/well-known world tariffs. Which of them could be used in the RF? Do you think it is possible to improve the economic situation in our country via tariffs policy? Prove it and give your own reasons. Are there any examples in the world experience?


Unit 8.

Customs Procedures

Warm up

Exercise 1.Could you remember what customs procedures are? What kinds of them do you know? Are there any peculiarities of Russian customs procedures?

Exercise 2.Match the English words on the left with their Russian equivalents on the right. Learn the words by heart.

1. to stipulate a) уполномочивать, поручить, давать возможность;
2. sufficient b) заранее;
3. in advance c) освобождение;
4. a temporary importation d) грузополучатель, консигнатор;
5. to empower e) обусловливать;
6. a customs brokerage f) временный ввоз;
7. an admissibility requirement g) на усмотрение декларанта;
8. at declarants’s discretion h) достаточный; обоснованный;
9. an exemption i) допустимое требование;
10. a consignee j) профессия таможенного брокера.

READING

Exercise 3.Read and translate the following text. Use the dictionary when necessary.