Distinguish_between_tax_and_fee.docx

ACC 223: Taxation

Distinguish between Tax and Fee: A government has several means of raising revenue in order to allow it to function. Among the two most popular methods of raising revenue are to impose taxes and fees on various activities. Generally, taxes are applied to various transactions, often as a percentage, as a means of raising revenue or, in some cases, as a means of incentivizing behavior. Fees, unlike taxes, are directly linked to the cost of providing a service. Tax Tax is the compulsory payment to the government

Fee Fee is the voluntary payment for getting service.

without getting any direct benefits. If the element of revenue for general purpose of the

While a fee is for payment of a specific benefit or

State predominates, the levy becomes a tax.

privilege although the special to the primary purpose of regulation in public interest.

In regard to tax, there is not and must not always

In regard to fee, there is and must always be,

be, direct correlation between the tax and the

correlation between the fee collected and the

service intended to be rendered.

service intended to be rendered.

Tax is compulsory payment.

Fee is the voluntary payment.

If tax is imposed on a person he has to pay it.

On the other hand, fee is not paid if the person does

Otherwise he has to be panelized.

not want to get the service.

In this case, tax payer does not expect any direct

Fee payer can get direct benefit for paying fee.

benefit. Examples: income tax, gift tax, wealth tax, VAT

Examples: Stamp fee, driving license fee, Govt.

etc.

registration fee etc.

After the above discussion we can say that, though there are some differences between tax and fee but both of them play a vital role for collecting government revenue.

Course Teacher: Rejaul Karim, Lecturer, Department of Business Administration, Varendra University; E-mail:[email protected]

ACC 223: Taxation

Difference between Tax Avoidance and Tax Evasion: Every individual assessee wants to escape from paying taxes, which encourages them to use various means to avoid such payment. Tax Avoidance and Tax Evasion are two techniques which are used by many people

to reduce

their

tax

liability. They do so

by taking expert

advice. Tax

Avoidance is completely lawful while Tax Evasion is considered as a crime in the whole world. In spite of many differences in the two practices, people use them interchangeably which is incorrect. So, the important differences between Tax Avoidance and Tax Evasion are given below. BASIS OF

TAX AVOIDANCE

TAX EVASION

Minimization of tax liability, by

Reducing tax liability by using illegal ways

taking such means which do not

is known as Tax Evasion.

COMPARISON Meaning

violate the tax rules, is Tax Avoidance. Concept

Type of means used

Taking unfair advantage of the

Deliberate manipulations in accounts

shortcomings in the tax laws.

resulting in fraud.

Use of Justified means

Use of such means that are forbidden by law

Type of act

Legal

Criminal

Consequences

The result of tax avoidance is

Whereas the consequence of tax evasion, if

postponement of tax.

the assessee is found guilty of doing so, is either imprisonment or penalty or both.

Tax avoidance and Tax Evasion both are meant to ultimately reduce the tax liability but what makes the difference is that the former is justified in the eyes of the law as it does not make any offense or breaks any law. However, it is biased as the honest tax payers are not fools, but they can also make arrangements for postponing unnecessary tax. If we talk about the latter, it is completely unjustified because it is a fraudulent activity, because it involves the acts which are forbidden by the law and hence it is punishable.

Course Teacher: Rejaul Karim, Lecturer, Department of Business Administration, Varendra University; E-mail:[email protected]