What’s the effective rate of protection?

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Tariffs on intermediate inputs vs final goods:

Today I received some tax saving wisdom from a taxi driver in Ukraine. He told me that people who import cars to Ukraine sometimes cut the car in two separate pieces and carry it through the customs this way. By doing this, they save a fortune on import tax. A car carried in two pieces is seen as spare parts and therefore is taxed at a much lower rate than a normal car.

cars-cut-in-half-for-lower-import-tax

cars-cut-in-half-for-lower-import-tax-2

When in Ukraine, the car is welded back into one piece. After that, it’s usually sold locally at a good price. I looked through forums and apparently this is a common practise in developing countries, particularly in post-Soviet states such as Ukraine.

Via MR.

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One Response to “What’s the effective rate of protection?”

  1. Bernardo Says:

    Someone told me a similar story about LCD TVs in Argentina being imported from China “in parts” (that is dissembling them in China right before export) to be assembled back in Patagonia, where firms receive tax benefits.

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