Taxation

International trade involves movements of Goods (imports and exports) from one country to another
country. Every country follows either a policy of free trade or protection. In a free trade policy, there is no
restriction on movement of goods between countries. Protection involves encouragement to home industry
by providing subsidies to domestic producers or usually by providing tariffs (customs duty) on imports and
exports. Custom duties are levied with twin objectives of:
1. Generating revenue for the state and
2. Protecting interested of domestic industry by making imports costlier.
Thus, tariffs (customs) restrict international trade (particularly imports). These are used as a tool for
protection of domestic industry. Main benefits of protection are:
1. Infant industry in under-developed/developing countries requires protection from competitors
during early growth period for its proper nursing.
2. To bring about harmonious and balanced growth of all industries.
3. For expanding employment and income.
4. To correct disequilibrium in balance of payments.
5. For making terms of trade favorable to an importing country.
6. Customs have been a very productive source of state revenue.
7. For conserving scarce natural resources of a country. (E.g. minerals and other raw materials)
8. Key industries such as iron & steel, heavy chemicals have to be protected for a better and bound
industrial structure.
9. To protect market from dumping.
10. Developing countries (agrarian economies) can develop industrial potentialities rapidly by
minimizing foreign competition through high tariffs.

In a nutshell, Custom duties do affect import volume, prices, production and consumption. They also
affect terms of trade, balance of payments etc.
Custom duties include import duties, export duties and transit duties. Two types of duties also levied to
achieve specified objective under customs. These are:
1. Revenue duties
2. Protective duties/Tariffs.

Revenue Tariffs are levied to generate revenue for the state. Revenue tariffs are generally not meant to
check imports.

Window Dressing
Define window dressing. Discuss its merits and demerits.
Window dressing is much widely used concept in the corporate sector. The management of business
houses uses these techniques for the presentation of their financial statements before its users.

Window dressing is defined by different institutions & individuals in various manners.

Some have defined it as an accounting trick to make the balance sheet and income statement appear to
be better then they actually are.

To few, it is an instrument used in documents and pictures to make something to appear more attractive
than it is actually are.
Window-dressing is used popularly in business activities for advertising, selling & marketing. The Financial
statements are window-dressed to present the financial items & results and to increase the real goodwill of
the firm.

Features:
Window-dressing has the following basic features.
1. It is an instrument used in the financial statement.
2. It is used in advertising, selling & marketing.
3. It is suppression of facts.
4. It is unethical or illegal.
5. This is used to show strong financial position.
6. It is used to create goodwill for the firm.
7. It is a good practice with bad ends.

Window-dressing good practice with bad ends.

Window-dressing is mostly used for presentation of facts in the financial statements. There is manipulation
& suppression of facts. It may be used for the benefit of the firm. But it has bad ends. It is short lasting.
The actual facts and figures can’t be suppressed for a long. The true result is to come to light. Therefore, it
is said that window dressing is a good Practice with bad ends.
Advantages:
1. It is popularly used for financial reporting.
2. It is a tool used for increasing the goodwill of the firm.
3. It makes the financial statements more attractive.
4. It is very much useful for advertisement, selling & marketing for the products.
5. It helps in enhancing the image and value of the firm in the market.

Disadvantages :
However, Window-dressing has the following limitations:
1. It is suppression of facts.
2. It is unethical & illegal.
3. It is short-lasting as actual facts can’t be suppressed for long.
4. It has a bad end.