Duty (economics)
Encyclopedia
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 transaction
s, 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.
which is realized 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 is referred to as import duty. In the same vein, duties realized on export consignments is called export duty. Tariff, which is actually a list of commodities along with the leviable rate (amount) of Customs duty, is popularly understood as Customs duty.
However, for certain items like petroleum and alcohol, Customs duty is realized at a specific rate applied to the volume of the import or export consignments.
code. This code has been evolved and assigned by the World Customs Organization
based in Brussels. H. S. Code may be from four to ten digits. For example 17.03 is the H. S. Code for molasses from the extraction or refining of sugar. However, within 17.03, the number 17.03.90 stands for "Molasses (Excluding Cane Molasses)".
Introduction of H. S. 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 departments often specifies the rate of Customs duty with reference to the H. S. 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 codes.
.
s and airport
s that do not attract the usual government taxes and customs duties. Some countries impose allowance
s 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 souvenir
s. 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
.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, a duty is a kind of tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
, often associated with customs
Customs
Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country...
, 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
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
, financial transaction
Financial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
s, estates
Estate (law)
An estate is the net worth of a person at any point in time. It is the sum of a person's assets - legal rights, interests and entitlements to property of any kind - less all liabilities at that time. The issue is of special legal significance on a question of bankruptcy and death of the person...
, etc., and not on individuals; thus it is right to talk of import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
duties, excise
Excise
Excise tax in the United States is a indirect tax on listed items. Excise taxes can be and are made by federal, state and local governments and are far from uniform throughout the United States...
duties, death
Death
Death is the permanent termination of the biological functions that sustain a living organism. Phenomena which commonly bring about death include old age, predation, malnutrition, disease, and accidents or trauma resulting in terminal injury....
or succession
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
duties, etc., but not of income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
as being levied on a person in proportion to his income.
Customs duty
Customs duty is a kind of indirect taxIndirect tax
The term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...
which is realized on goods of international trade. In economic sense, it is also a kind of consumption tax
Consumption tax
A consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax...
. Duties levied by the government in relation to imported items is referred to as import duty. In the same vein, duties realized on export consignments is called export duty. 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
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 determines assessable value in accordance with Brussels definition.However, for certain items like petroleum and alcohol, Customs duty is realized at a specific rate applied to the volume of the import or export consignments.
H. S. Code
For the purpose of assessment of Customs duty, products are given an identification code that has come to be known as the Harmonized SystemHarmonized System
The Harmonized Commodity Description and Coding System of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization , an independent intergovernmental organization with over 170...
code. This code has been evolved and assigned by the World Customs Organization
World Customs Organization
The World Customs Organization is an intergovernmental organization headquartered in Brussels, Belgium. With its worldwide membership, the WCO is recognized as the voice of the global customs community...
based in Brussels. H. S. Code may be from four to ten digits. For example 17.03 is the H. S. Code for molasses from the extraction or refining of sugar. However, within 17.03, the number 17.03.90 stands for "Molasses (Excluding Cane Molasses)".
Introduction of H. S. 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 departments often specifies the rate of Customs duty with reference to the H. S. 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 codes.
Customs department
The national authority that is entrusted the task of realizing 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 duty
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 smugglingSmuggling
Smuggling is the clandestine transportation of goods or persons, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.There are various motivations to smuggle...
.
Duty-free goods
Duty-free is the term that is often used to describe goods bought at portPort
A port is a location on a coast or shore containing one or more harbors where ships can dock and transfer people or cargo to or from land....
s and airport
Airport
An airport is a location where aircraft such as fixed-wing aircraft, helicopters, and blimps take off and land. Aircraft may be stored or maintained at an airport...
s that do not attract the usual government taxes and customs duties. Some countries impose allowance
Allowance
Allowance may refer to:*Allowance *Allowances in accounting, see Accounts receivable*Personal allowance in the United Kingdom's taxing system* Jobseeker's Allowance, a term for unemployment benefit in the United Kingdom* EU Allowances...
s in order to restrict the number of Duty-free items that one person can import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
into the country. These restrictions often apply to tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
, wine
Wine
Wine is an alcoholic beverage, made of fermented fruit juice, usually from grapes. The natural chemical balance of grapes lets them ferment without the addition of sugars, acids, enzymes, or other nutrients. Grape wine is produced by fermenting crushed grapes using various types of yeast. Yeast...
, spirits
Distilled beverage
A distilled beverage, liquor, or spirit is an alcoholic beverage containing ethanol that is produced by distilling ethanol produced by means of fermenting grain, fruit, or vegetables...
, eau de toilette, gifts and souvenir
Souvenir
A souvenir , memento, keepsake or token of remembrance is an object a person acquires for the memories the owner associates with it. The term souvenir brings to mind the mass-produced kitsch that is the main commodity of souvenir and gift shops in many tourist traps around the world...
s. 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
Bonded warehouse
A Bonded warehouse is a building or other secured area in which dutiable goods may be stored, manipulated, or undergo manufacturing operations without payment of duty. It may be managed by the state or by private enterprise. In the latter case a customs bond must be posted with the government...
.
See also
- TariffTariffA tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
- Free economic zoneFree economic zoneMany countries have, or have had at some time, designated areas where companies are taxed very lightly or not at all to encourage development or for some other reason...
- Free portFree portA free port or free zone , sometimes also called a bonded area is a port, port area or other area with relaxed jurisdiction with respect to the country of location...
- Duty-free shopDuty-free shopDuty-free shops are retail outlets that are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country...
- SmugglingSmugglingSmuggling is the clandestine transportation of goods or persons, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.There are various motivations to smuggle...
- Tax EvasionTax evasionTax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...