Article
★ What is the Purpose of Import Tax?
★ When can Import Tax be applied?
★ Should Mali increase import Tax? (for Malian citizens)
We often encounter the word Import Tax when posting an offer in product market, but what does it exactly mean and when is this tax applicable?
IMPORT TAX, is the tax collected on imports by the country who owns the market where products are posted or put on sale, in respect with their current laws on import tax rate of specific products (you can check tax rates on Economy section under Country). A product is considered imported if it is sold by a seller/businessman to a country that isn't his own, therefore, this doesn't affect sellers (Malian for example) who sell in their own market (Malian Market) . (translating to dumb language: if you sell in a market with a different flag as yours, you will be charged with import tax depending on their law)
What is the purpose of the import tax?
Obviously, this is a fee charged to foreign sellers/businessmen who makes use of a country's product market, adding more profit to a country for products sold with import tax. In e-sim however, this serves another common purpose, TO PROTECT local sellers by giving them a profit advantage over foreign sellers.
Below is an example of how import tax gives locals an advantage. Assuming that Q5 food is sold at the same price by both local and foreign sellers in Malian market with 5% import tax; at 2.3 ML (0.16g) locals would receive a net price of 2.23 ML ( 0.156g), while foreign sellers would have 2.13 ML (0.149) as net price. In a larger scale, foreign sellers would lose 7g per 1k sold because of the 5% added import tax. It is quite much for a businessman who has profits to chase, despite the fact that's it is only 5% import tax (other major countries have even more higher import tax, ranging from 10-15%)
Yes it maybe true that import tax is a great tool in aiding local businessmen in competing with foreign sellers. It is their own market in the first place, they should be the ones who should have the advantage. However, this should be imposed with uttermost sensitivity and keen observation on market's crazy movement. The imposition of import tax depends largely on the availability of products in the market. A market with low number of local sellers of a specific product paired with a greedy businessman will end up with sky rocketing prices.
Look at the screen shot below, think if the seller cares more about money than positing a justifiable price for his product, he could have posted as high as 3ML (0.21g) and get a decent amount of income from it. Being the only sellers, gives you the complete freedom to manipulate the price according to your own will, and victimized poor desperate players who are in a hurry. Removing or at least reducing import tax on products with low supply, will encourage foreign investors to post their products. Thus, places a fine competition for local businessmen, controlling the price near normal rate.
To put it simple, import tax can be a friend or foe. It has to be properly selected which of the specific products should have import tax and which should be left without. Rule of the thumb, if the local market has enough supply of those products, add import tax, on the other hand, if there aren't much supply, remove import tax to invite more investors to sell their products in our market.
FORMULA:
High Income Tax + Decent Number of Local Seller= Normal Prices, Profit for Local Sellers
High Income Tax + Low Number of Local Seller= High Product Prices
Low Income Tax + Low Number of Local Seller= Normal Prices, Profit for both Foreign and Local
Now having my little knowledge imparted to you on import taxes, I would like to address an issue that is apparently been source of disputes among Malians over the past few days. I have received messages of congress members who wanted to increase import tax of common goods and raw materials up to 20%. Their purpose is to protect Malian businessmen by discouraging foreign sellers from selling in our market. I personally appreciate the concern towards our local businessmen but we need to check first if it is really needed.Let us take a peak on how Malian market looks like,
Q5 Food: Import Tax- 5%, Price- 0.16g
Q5 Gifts: Import Tax- 5%, Price- 0.30g
Q5 Weapons: Import Tax- 10%, Price- 0.31g
Q1 Weapons: Import Tax- 10%, Price- 0.0497g
Q5 Tickets: Import Tax- 0%, Price- 0.677g
Iron: Import Tax- 0%, Price- 0.0119g
Grain: Import Tax- 0%, Price- 0.0112g
Oil: Import Tax- 0%, Price- 0.014g
Diamonds: Import Tax- 0%, Price- 0.0119g
As what I have stated above, import tax's purpose is to protect or at least provide local sellers the advantage in the competition. It is apparent based from the screen shots above, that Mali hasn't so much foreign investors taking advantage of our market. In fact, we lack LOCAL sellers especially on some raw materials. Furthermore, adding import tax, may be risky as it implies increase of local prices on products without enough local sellers,as foreign will tend to PLACE the burden among the buyers to compensate with the import taxes they pay.
Now, fill in the black, Low Number of Sellers + __________ = Normal Prices
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