Trade liberalisation is when different nations remove and reduce barriers or restrictions on free exchange of goods. It applies to the reduction or removal of tariffs and non-tariffs. The World Trading Organisation encourages multi-lateral trade agreements. Multi-lateral trade agreements are pacts between nations. The goal of these agreements are reducing tariffs and to make it easier for countries to import and export, thus making it easier to enter each others markets.
In this case, allocative efficiency can be achieved when the tax is assigned to be equal to the externality, which moves back the demand curve to the MSB. Reflected the reality, since the demand for the carbon cars decreases to a practical level, the pollution it causes can probably be absorbed by plants. Thus, the negative externality is eliminated. The indirect taxes are the preferred measure in this case. Although there is a particular difficulty in measuring the value of the external costs to decide the amount of tax imposed, they internalize the externality.
Trade Liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). Free trade encourages countries to interact with each other and help them benefit from the idea of comparative advantage. In addition, it is efficient in many ways such as lowering costs and transferring technologies. This paper will be discussing the effects of trade liberalization on economic growth.
Economic Concept The first economic concepts that exhibited in the article is GST will affect the aggregate demand and aggregate supply (AD-AS) model. From the articles, we know that GST taxes are applied only on the consumption component while the savings and investment are not taxed. This will encourage consumers to save more while the business to invest more in productive activities. Consumer spending is a major component of aggregate demand(AD) and economic growth(Y). If consumer increase in saving, it will reduce the rate of economic growth.
This can be done by linking the costs or benefits of those impacts to those who are involved in the economic transaction. The externalities can be internalized if the producer of a good or service change their behavior or adopt new technologies and practice to minimize the impact. The government also could pass regulations that force the producer to change their behavior or to adopt new technologies and practices to minimize the impact. The consumers can voluntarily pay an additional fee to pay for goods or services with fewer externalities. Further, government can use taxes an incentives for the producers to cut back on pollution (Pigou, 1920s).
Irrespective of where a country lies in terms of development, the enactment of the tax levy will affect it. Certain ethical implications may arise from these impositions. Legally tax planning and avoidance are allowed. Tax planning is using acceptable methods the country’s revenue service accepts; to reduce income and/or increase expenses; which results in a decrease in annual income. Tax avoidance is similar to tax planning; however, the tax payer may only do so if the methods they use to reduce their income is not illegal in any manner.
Basing our research on Tariffs as being one of the most significant tax commodity we shall be able to analyze the different ways they impact the world trade (Bernhofen et. al 36). Tariffs in most cases limit or restrict imports through raising the prices of services and goods bought from overseas or other states, and thus this makes them less competitive on the domestic market. As mentioned earlier, governments from different countries can impose tariffs to increase revenues for protection of local industries from foreign competition. It is achieved through increases the prices of foreign-produced goods and thus prompting the consumers of that particular country to value or buy products from their domestic industries.
It is expected that compliance will be mandatory for large MNC’s who have the resources to engage in aggressive tax planning. Dealing with profit shifting loopholes, encouraging companies to raise finance through equity and granting tax incentives for funding Research and Development activities which are linked to economic activity. European Commission (2017) states that “the CCCTB will eliminate mismatches between national systems which aggressive tax planners currently exploit. It will also remove transfer pricing and preferential regimes, which are primary vehicles for tax avoidance
Free trade agreement allows the agreeing nations to focus on their comparative advantages and to produce the goods they are comparatively more efficient at making, thus increasing the efficiency and profitability of each country. 4. OBJECTIVE OF FTA Free trade agreements typically concern on import & export terms imposed by both agreeing countries. For instances, Import tax, it is one of the critical tariffs, it can impact the market directly, making the imported goods more expensive. Thus, the existence of FTA is to negotiate with partnering country to lower their import tax.
It will be levied at every stage in the supply chain and all the taxes paid previously will be credited. GST will be levied in two parts, State GST (SGST) and Central GST (CGST) to ensure proper revenue sharing between the central and state governments. Implementation of this tax reform is expected to end the drawbacks of the current tax system such as the cascading effect of taxes etc and thus lower the overall tax rate. Similar tax systems have already been implemented in multiple countries which have witnessed significant growth in their economies because of the same. Currently, the warehousing and logistics decisions in India are primarily based on tax saving considerations rather than on achieving operational efficiency.