Definition & Meaning:

Why is it cheaper for somebody in Britain to buy and import a laptop from Germany than it is to do the same thing from America? Of course, America is a lot further away from Britain than Germany is. But if the cost of delivery was free for both, it would still be cheaper to get the laptop from Germany. Why is that?

The reason is that in Britain you don't have to pay a tax for importing something from Germany, but you do when importing something from America. This tax is called a 'customs duty'.

'Customs duties' are a type of tax which are paid by a person or company when they import products from another country (and sometimes on exporting products as well). There are two main reasons why governments levy (make people pay) this tax. The first is to generate money. The second is to make products made abroad more expensive, giving a price advantage to products domestically manufactured or produced.

Normally, the 'customs duty' you pay when importing a product is a percentage of the price of the product (the higher the price the more you have to pay in 'customs duty') and it is a type of tax which is called an 'indirect tax'.

The percentage rate of 'customs duty' you have to pay depends on both the country where the product comes from and the type of product that is being imported (some products have a higher rate than others). For example, products imported into America which have been produced in Canada or Mexico either don't pay 'customs duty' or pay a lower rate than those imported from other countries.

Also Called:

Customs Tariff, Import Duty.

Related Vocabulary:

Indirect Tax, Excise Tax.

To learn more about taxes, you can do a free online exercise on tax vocabulary.