Export incentives

Export incentives
Primary topic
Related topics
Methods and techniques

Export incentives motivate companies to export certain types of products or services. They are created usually by government and can have form of regulatory changes, tax discounts, legal solutions or direct monetary form. The government may decide to e.g. subsidize export in order to make easier for companies to enter other markets. That however may be received as dumping practice by another country, which can begin to subsidize own producers or to increase customs. Therefore, export incentives should be applied after thorough analysis of the global market. Nevertheless, the main principle of export incentives is to streamline the whole export process and ensure greater flexibility. Export incentives play a significant role in economy's trade strategy of every country. Export promotion is important to maintain competitiveness on international market. Nevertheless, strategies of export promoting vary depending on level of development and Government policy of particular country (Ahmad I. 2015; s.99-110).

Examples of export incentives[edit]

The scope of export incentives is broad. Among other things it generally includes a lower income tax rates, zero-rating sales tax, exemption from export duties or low-cost loans (Ahmad I. 2015; s 99-110). The most popular examples of export incentives scheme are:

  • Duty Drawback - Through Duty Drawback customs duty and excise duty paid on inputs can be paid back to the exporter of finished products. This refund can be acquired when an import fee has been charged for a product or material, but this article is then subsequently exported. In most Asian countries, duty drawback schemes are the principal export incentive.
  • Duty Free Import Authorization (DFIA) - is given in order to enable duty-free import of inputs. Duty free Import Autorization is a benefit with which government help exporters get free imports on certain products: fuel, oil, energy sources and catalyst which are essential for production of export product.
  • Export Promotion Capital Goods Scheme (EPCG) - this scheme allows for the import of capital goods at concessional customs duty (Ahuja R. 2001's.25-28). This incentive was launched in oder to support exporters who wants to produce quality products and sell them on the international markets. Thereby, exporters have an opportunity to import needed equipment, machinery, vehicles and other tools at favourable prices.
  • Market Development Assistance (MDA)- this scheme has been implemented in order to support exporters in promotional activities of export on international markets. Implementation of this project aimed also to assisting Export Promotion Councils to perform export promotional activities for goods and products.

WTO Agreement on Subsidies and Countervailing Measures[edit]

Export incentives have a significant impact on exports policy in many countries. Large majority of countries provides some incentives to its exporters. Nevertheless, with accordance to WTO Agreement on Subsidies and Countervailing Measures not every types of export incentives are authorized. This agreement impose some limitation on using export incentives. The authorization to using of these incentives usually depends on level of development of particular country. Lesser-developed countries have a freer hand in using of them. This is specially intended to give them opportunity to improve and develop their country. Export promotion is still one of the major areas in need of attention for the Governments in evry country.

References[edit]

Author: Aneta Walczyk