(a) Explain five reasons why tariffs are imposed on imports.
(b) State five functions performed by the customs authority.
Explanation
(a) Reasons for imposing tariffs are:
(i) To raise revenue: For some third world countries, the main source of revenue is the taxes collected on imports.
(ii) Protection of infant industries: There is the need for nations to protect their infant industries from undue competitions with foreign ones from developed countries.
(iii) To prevent dumping: Taxes are imposed on imports to prevent the selling of goods in foreign countries at prices far below those charged in the home markets.
(iv) Balance of payment improvement: Tariffs help to improve a country's balance of payment/trade.
(v) Self reliance: To make a country self-reliant and consume locally-made goods, instead of foreign goods.
(vii) Political reasons: Tariffs can also be imposed for political motives to discriminate against unfriendly countries.
(b) Functions of the Customs Authorities:
(i) The agency is responsible for collecting revenue due from tariffs and excise duties.
(ii) It ensures that only authorised goods are allowed into the country; it checks smuggling and seized contraband goods.
(iii) It ensures that only licensed goods to be exported are allowed to leave the country for export or come into the country as import.
(iv) It also checks illegal trafficking of currency notes.
(v) It is involved in compilation of a wide range of statistics on foreign trade which is made available to the government.
(vi) It provides appropriate quarantine facilities for the import of live animals and living plants.
(vii) The agency also supervises bonded warehouses.