Difference Between Tariff and Quota

Tariff vs Quota

Tariffs and quotas are both imposed on import and export products by the government of a country. Tariffs and quotas both serve the purpose of protecting the domestic industry of a country in restricting the quantity of products imported or exported and also earn revenue for the government. Tariffs, basically, refer to a form of tax imposed on exports and imports, and a quota refers to the limitations imposed on the quantity of products exported or imported.

Tariff
Tariffs can be defined as duties or forms of taxes levied on goods for revenue and protective purposes when they are transported from one customs area to another. They can also be defined as a comprehensive schedule or list of merchandise along with their rates which have to be paid for each article according to the rules and regulations of the government.

In simpler words, we can say that tariffs are basically the money which is to be paid by a country for trading products, either exports or imports. The price of the product being traded increases when tariffs are imposed on the goods. The collected incomes from tariff taxes are called custom duties or custom.

Tariffs are useful for a country because they earn revenue for the government and raise the country’s GDP. A protective tariff helps in controlling trade between two countries and helping their undeveloped and noncompetitive industries become more competitive and also encourages the domestic industries. Tariffs are mostly imposed on imported goods and seldom on the goods which are exported. They usually cost extra money to the consumer. They are restrictions in order to control foreign goods from entering the domestic market.

Quota
Quotas are the limitations imposed by the government on what can be traded, the quantity that can be traded, how much needs to be paid for each item, and where the goods are being traded. They do not deal with limitations on how much is paid for the goods; thus, they have a neutral effect on the GDP of the country. When there is a loss in a consumer and producer surplus, the quota holders are benefited. It does not bring any revenue to the government and also encourages administrative corruption and smuggling. Everyone wants to have more quotas for trading. If they are not obtained, it can give rise to many evils.

Summary:

1.Tariffs are the taxes imposed by the government of a country on import and export products while a quota is the limitation imposed by the government on the number of goods that can be either exported or imported.

2.Tariffs earn revenue for the government and increase the GDP of the country while quotas are for the number of the products traded and not the amount paid; thus, it neutralizes the GDP.

3.The revenue obtained by tariffs brings gains to the government while the gains obtained by quotas are beneficial for the traders.

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