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Tariffs are only applied to a small number of imports with nearly 90 per cent of imports entering Australia duty-free. A tariff of 5 per cent is paid on about 10 per cent of imports, raising about $1.5 billion in revenue (this represents about 0.3 per cent of revenues collected by the Australian Government).

The government incurs costs to administer the tariff system. Those that could be estimated amount to between $11 million and $20 million. To the extent that agencies use cost recovery mechanisms, the costs are borne by businesses, and eventually, consumers — otherwise, administrative costs are borne by taxpayers.

Simplifying the tariff system will lead to cost savings for businesses that will eventually flow through lower prices to Australian consumers. The main savings are likely to be achieved by reducing the costs associated with concessions and preferences — or by simplifying the entire tariff system. Some savings are also likely to arise from trade facilitation initiatives, such as the Simplifying Trade System initiative already underway.

This report argues that the costs of the Australian tariff system arise mainly from its complexity. In Australia's low tariff-rate environment, the costs of the tariffs arise primarily from the complexity of the system rather than from distortions to the economy.

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