Question

Distinguish between a tax and a fee.

What is the difference between tax and fee?

Answer 1

1. A fee is imposed for a specific reason. For instance, the school management imposes a fee for school admission of a student. The tax has no specific reason. A sales tax is imposed on a commodity without stating any special benefit on a purchase of a commodity.
2. A fee is not a compulsory payment towards the government. There will not be any legal punishment against the non-payment of a fee. For example, if the admission fee is not paid, then the student will not be admitted into school. Tax is a compulsory payment made by people to the government.

Answer 2

	Tax		Fee
(i)	It is a compulsory payment made to the govt. which are imposed by the govt.	(i)	A fee is a payment paid by the people to the government.
(ii)	Taxes are paid to the govt. irrespective of the benefits to the payer.	(ii)	Fees are paid by those who are benefited from the special services.