revenue tariff

A revenue tariff is a tax imposed on goods as they cross national borders, primarily intended to generate public income for the government. While tariffs can serve multiple purposes, a revenue tariff's main objective is to raise funds, though it may also offer some protection to domestic industries.123

Developing nations often rely on revenue tariffs because they are easier to administer than income taxes. However, the amount of revenue generated by tariffs is limited; excessively high rates can reduce imports and, consequently, the revenue collected.4

Tariffs can be specific (a set amount per unit) or ad valorem (a percentage of the value). They can also vary based on the country of origin. While tariffs can encourage domestic production and employment by raising the price of imports, they can also reduce consumption of those goods and potentially lessen the incentive for domestic industries to innovate.3