Taxing sinks

South Africa’s largest stainless steel sink manufacturer has accused manufacturers of stainless steel sinks located in Malaysia and China of “dumping” their products in SA. To remedy this situation it has asked the government for not only an extension of the current tax on imported sinks but also an intensification of these protectionist measures (Business Day – Sink makers call for higher China duties by Amanda Visser. Oct. 1, 2014).

The South African sink manufacturer has asked government to increase taxes on sinks originating from China from the current rate of 62.4% to a scandalous 586% and sinks originating from Malaysia from the current rate of 95.8% to a whopping 831.68%. It’s time to pull the plug on this protectionist racket that only serves the very narrow vested interests of the few and to allow cash-strapped SA consumers to enter into mutually beneficial agreements for the purchase of low cost sinks from foreign manufacturers.

Given that the primary motivation of entering into business is to make a profit, which firm would want to sell below cost? If, for whatever reason, some Chinese and Malaysian manufacturers choose to sell their products at a price below production cost South Africans should welcome that gift. The increased disposable income will allow consumers to save and invest the money or simply spend the cash on other products that will improve their standard of living.

Artificial trade barriers are the result of productive resources being diverted to achieve political ends and, in the process, taxing unsuspecting consumers to line the pockets of the special interests that succeeded in enlisting the weight of the government on their side. Trade barriers harm the majority of South African citizens by raising the price of imports. In contrast when trade is open, domestic and foreign consumers decide which industries will prosper and the increased competition leads to greater efficiency overall.

Government intervention in voluntary economic exchange, on behalf of some citizens, necessarily comes at the expense of others and is inherently unfair, inefficient, and subverts the rule of law. At their core, trade barriers are the triumph of coercion and politics over free choice and economics.

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