QS Study

Tax is the compulsory payment to the government without getting any direct benefits. Fees are generally obligatory to regulate or control various types of activities. However, a fee is particularly applied for the use of a service. The difference between a tax and a fee generally turns on the use of the revenue.

Difference between Tax and Fee

Tax

  • Definition: A tax represents money – that a government charges an individual or business when they perform a particular action or complete a specific transaction.
  • Measured: This tax is often assessed as a percentage of an amount of money involved in the transaction.
  • Example: A tax is applied on the income that a person makes during a year. In addition, a tax is often pieced on the sale of goods. income tax, gift tax, wealth tax, VAT etc. are examples of tax.

Fee

  • Definition: A fee is related to a tax in that it is also a charge paid to the government by individuals or by a business.
  • Measured: The fee rate is directly tied to the cost of maintaining the service. Money from the fee is generally not applied to uses other than to provide the service for which the fee is applied.
  • Example: However, a fee is specifically applied for the use of a service. For example, a government may charge a fee to visit a park. Stamp fee, driving license fee, Govt. registration fee etc. are examples of Fee.