Relation Between Import Tax And Strength Of Local Currency
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by Desertfalcon
There has been a bunch of debate over whether the import tax should be raised or not. Most critics of a higher tariff cite that it would increase the price of goods and prevent American citizens from getting the cheapest possible goods. Proponents argue that a higher tariff will help out American companies and strengthen the USD. Now here are some statistics I found from the top 6 countries
USA
Cheapest q1 Food- 1.61 USD (0.02415 gold)
Conversion Rate- 0.015
Import Tax- 15%
Spain
Cheapest q1 Food- 0.78 ESP (0.025 gold)
Conversion Rate- 0.032
Import Tax- 99%
Romania
Cheapest q1 Food- 1.32 RON (0.02376 gold)
Conversion Rate- 0.018
Import Tax- 99%
Indonesia
Cheapest q1 Food- 0.75 IDR (0.2075 gold)
Conversion Rate- 0.027
Import Tax- 99%
Croatia
Cheapest q1 Food- 1.41 HRK (0.02679)
Conversion Rate- 0.019
Import Tax- 99%
United Kingdom
Cheapest q1 Food- 0.79 GBP (0.0205 gold)
Conversion Rate- 0.026
Import Tax- 50%
Analysis
Now before you go and try and attack the numbers with this all Franco's fault keep in mind that food prices and the price of USD are at about the same level they were BEFORE the theft of the reserve. The reserve may of been empty but the markets did not take a huge hit from it. As you can see the U.S. has by far, the lowest import tax and the weakest dollar compared to the other top 6 countries. Also food in the U.K. and Indonesia is almost 20% cheaper despite import taxes of 50% and 99% respectively.
Now a few months ago we were short on food and how to lower the import tax but as of now we have more then enough q1 food to supply ourselves. The reason we needed foreign imports back then was that once V1 came out many people flocked to raw material companies where they were paid insanely high wages like 50 USD for a 0 skill worker. When this happened we lost skilled food employees and the supply dwindled dangerously low. Over time this has balanced out and now we have more then enough food to support ourselves yet we still allow foreign companies in who hinder the growth of the USD.
I am not saying that we should raise our tariff to 99% but 15% is way too low and we are not seeing much benefit from it.
Just some food for thought for congress
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Comments
First? Good article!
Damm alomost there
😉
@jarumas
you posted when I was writing
Good thought.
That's what we need to start doing. Many people just look at what is being proposed and think what will happen, but with as many countries out there as there are, we could just look at them and see what actually did happen from them.
I would like to add, Notice the import taxes in 3 of the strongest eNations(Romania, Indonesia, Spain) 99%
Yet their food prices are lower or nearly equal to our own.
We need to stop allowing foreign countries from taking advantage of our market. I was around for the food shortages awhile back. Our great nation's entrepreneurs have created companies since then. It is time to RAISE THE IMPORT TAX.
awesome article DF, this one should carry some weight
I think the U.S. needs to put the Import tax at about 5-10% above the Income tax to give local business an edge over foreign suppliers but not so much so that they get greedy (a reasonable income tax keeps all businesses honest)
Looks like those with the highest Import Taxes have the strongest Currencies... 🙂
The thing with income tax is, a lot of business owners skip paying it by trading with their own company through the monetary market.
If everyone would pay their tax, our government would receive more income. It could lead to lower income taxes for everybody. Maybe that should be addressed by the powers that be.
Here is a thought. A Member of Congress should propose an increase in the Import Taxes. Anybody who votes against that bill should be singled out in the upcoming Congressional Elections as being Pro-Foreigner and Anti-American.. That oughta sway some votes towards getting those tariffs raised.
Now don't get me wrong. Increasing trade is always good for everybody. But when other nations protect their markets and we leave ours open to rape and pillage, we have to ask ourselves who's benefiting.
Setup our Import taxes based on a basket of the Top10 Markets in
eRepublik.
JDS@
Or could those same tax cheats be cheating they government because of the fact that taxes are too high? In effect, the high tax rate has encouraged tax evasion.
@Alby - wow, nice hyperbole!
"But when other nations protect their markets and we leave ours open to rape and pillage, we have to ask ourselves who's benefiting."
Can you provide specific evidence of the "rape and pillage" of our markets? That would definitely be worthy of investigation by Congress.
@DF - Great article, voted. I really appreciate your efforts to use data to back your position. As a snapshot I think it is semi-effective, but I note that you do not recognize the interdependence of taxes, and did not show the income tax rates of said Nations on the given industry. Or do you feel that that taxation policy as a whole is interdependent and genuinely affect the elasticity of a given industrial market?
Additionally, you stated "I am not saying that we should raise our tariff to 99% but 15% is way too low" So what level should it be at and can you provide the reasoning behind why you propose it?
Or should we just pick something at random which apparently has been done through the course of eRep history until the CTPA came along with a negotiated (although imperfect) comprehensive tax policy model?
Thanks
One issue you have not thought about is how it will make our neighbors feel: Import taxes that are high do not create friends.
Higher? maybe, but only in my book marginally higher.
Totally agree - voted.
Great data.
Even better analysis.
It makes the case for higher import taxes...better USD...put money into the pockets of the worker...it is just sound policy!
excellent analysis.. but I disagree with having any tariffs whatsoever. allow consumers to purchase the cheapest goods, regardless where they lie. if you want people to buy emerican, then emerican companies must learn to compete on a price basis.
look at the price of food in indonesia... we should have 50% rates
@ big horn
Look at the numbers, lower tariff don't equal cheaper goods
@ Ansen
I was content back when it was 40%. Most countries do good with 99% and our economy was doing great when it was back at 40 the CTPC just ruined all that moving everything to 15%.
Alby, may I note that you should get active on the eUS Forums. I have posted multiple times during the Emergency Tax Policy that we start considering raising the tariff on food to much higher levels. I will admit, I have not pushed full force with it but I do plan to once taxes are returned to their previous figures.
DF, this applies mostly to food and Finished Goods, and I agree. What we should have are lesser taxes on RM. We have a fairly high USD conversion ratio but not as much as Spain or others and thus are not ideal for market flooding. By allowing more competition in the RM markets, we would allow for cheaper Finished Goods and more supply of RMs.
Good evidence: The CPA raised the tariff on wood 5%, it was at 10% and is now 15%. At 10% there were NO foreign competitors except for a German company in a Medium Productivity that put around 20 product a day (and always sold above-competition). With the taxed raised, there has been no foreign competition worth noting in the wood industry. I proposed we set the tariff to 5%, to give both fair government revenue and not to allow flooding I was met with protectionist arguments.
this is a great article DF, and brings up the big reason why doesn't congress agree.
voted
I would support a food Tariff anywhere from 20%-30%. Foreign companies frequently undercut US companies in the q3 sector, and I am a strong supporter of the safety valve idea, where the import tax is high enough to allow only US companies in markets, but when the prices raise, allows foreign companies to help knock prices back down.
May I point something out? As a rational business owner (the only ones capable of producing large quantities for an extended period of time), why would you export to a country like the U.S. given the uncertainty over the currency and tariffs? Something to think about...
May I suggest taking the conversation back to first principles*: what does a "good" economy look like? How do you measure it?
Labor productivity? Capital productivity? Full Employment? Efficiency? Wellness? Profitability? Inflation? Government expenditure are % of GDP? Tax rate? Income inequality? Imperial influence?
It looks like your measures are currency value, the size of the trade surplus, and price level stability, but the "Important" measures of policy success aren't actually expressed.
...Personally, I'd be encouraging economic imperialism.