Customs Taxes and Their Types

Customs Taxes and Their Types

In general, governments impose and collect taxes on the import of goods from foreign countries, known as customs duties. Customs taxes and duties take various forms, and their rates are set by the government. A tariff refers to the tax or duty imposed on goods traded between different countries or regions and serves as a criterion for the classification and identification of goods at the time of customs clearance. These tariffs are specific policies implemented by governments.

Amounts collected on imported goods at customs are divided into several categories:

• Duties and charges, which are considered types of indirect taxes.
• Service fees are collected in return for services rendered, including loading, unloading, testing, warehousing, and standardization.

To properly address the subject of customs taxes, it is first necessary to provide an explanation of taxation and its various forms.

Method of Calculating Customs Taxes and Influencing Factors

Tax

According to the Organisation for Economic Co-operation and Development, a tax is a mandatory, compulsory, and non-refundable payment that may be imposed on individuals, institutions, assets, and similar entities. In essence, tax constitutes a portion of society’s income or the profits derived from economic activities that belong to the government, as governments provide the tools and infrastructure necessary to generate such income and profits. It is worth noting that economists generally show greater support for consumption-based taxation.

Types of Taxes

Taxes are divided into two main categories:

• direct taxes and indirect taxes. A tax is considered direct when the taxpayer and the payer are the same person.
• Otherwise, it is classified as an indirect tax. The taxpayer is the individual or entity legally responsible for paying the tax.

Types of Direct Taxes

• Property Tax: In this type of tax, the basis of taxation is the taxpayer’s wealth. The property tax itself is divided into two categories.
• Inheritance Tax: Inheritance tax is one of the most significant forms of property tax, levied on the assets and property remaining after an individual’s death.
• Stamp Duty Tax: Pursuant to Articles 44 to 51 of the Direct Taxation Act, this type of direct tax is collected from the taxpayer in order to grant legal validity or enforceability to documents, papers, and records through the affixing and cancellation of tax stamps.
• Income Tax: In this category, the basis for taxation is the income of individuals and companies rather than their accumulated wealth.

Types of Indirect Taxes

Import Tax

These taxes generally follow economic conditions and macro-level trade policies. In addition to serving as a source of government revenue, they are commonly used to support domestic industries. The assessment and collection of such taxes may be based on the price and value of goods or on their specific characteristics, including volume, weight, and similar factors.

Consumption and Sales Tax on Goods and Services

This tax is paid by consumers when purchasing certain goods. Accordingly, the greater the amount of goods consumed by an individual, the higher the tax imposed. Although the final consumer bears the economic burden of this tax, the law requires producers and sellers to pay it.

Value Added Tax

Value Added Tax is an indirect tax imposed on the difference between the value of goods and services supplied and the value of goods and services purchased or acquired during a specific period.

Customs Tariff

It can be stated that the collection of duties and charges is carried out by customs authorities, while the collection of service-related fees is the responsibility of the relevant service providers.

The term customs duties consists of the following two components:

• Customs duty is enacted by the legislature, which is set at 4 percent for all goods.
• Commercial profit is determined by the government.

In practice, the amount payable as entry duty for imported goods constitutes the customs tariff, which is applied and utilized within a structured, system-based, and historically developed framework.

Frequently Asked Questions About Customs Taxes and Their Types