Main difference between Tax and Fee

Main difference between Tax and Fee

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. A tax is a compulsory contribution made by a taxpayer. A fee is a voluntary payment. 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. Taxes are levied in the greater interests of the country.
  • Measured: This tax is often assessed as a percentage of the amount of money involved in the transaction.
  • Levy collection: A tax is a levy collected for general government services. It is a way to generate revenue by Govt.
  • Administration and Application: Your taxes may pay the salary of a teacher, police officer or bureaucrat. They may help pave a road or build a school. They may finance the running of the local sewage-treatment plant.
  • 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. Fees are mostly imposed to regulate or control various types of activities.
  • 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.
  • Levy collection: A fee is a levy collected to provide a service that benefits the group of people from which the money is collected. It is charged for services rendered by an individual /Company/Professionals.
  • Administration and Application: A fee is assessed for an exacting service, and the money collected is usually earmarked for that service. The fee that you pay for inspecting your assets every other year probably goes directly to cover the costs.
  • 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.

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