Tax or Fee Meaning and Difference
S J Tubrazy
Tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. Fee may be generally defined to be a charge for a special service rendered to individuals by some governmental agency.
As far as fee is concerned, it is distinguishable from tax. The distinction between “tax” and “fee” lies primarily in the fact that a tax is levied as a part of common burden while a fee is paid for a special benefit or privilege. Fees confer a special capacity although the special advantage as for example, in the case of registration fee for documents or marriage licence is secondary to the primary motive or regulation in the public interest. Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit, which the individual receives. It is the special benefit accruing to the individual, which is the reason for payment in the case of fees. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. Unless the fee is earmarked or specified for rendering services to the payee, it would amount to a tax and not a fee.
On the other hand the nature of tax is entirely different. Tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. A fee may be generally defined to be a charge for a special service rendered to individuals by some governmental agency. A fee may be compulsorily levied as well as tax, but the distinction between them lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for special benefit or privilege.
The term ‘tax’ is a charge by the Government on the income of an individual corporation or trust as well as the value of the estate or goods. The objective necessitating the tax is to generate revenue to be used for the needs of public; a pecuniary burden laid upon individual or property to support the Government and is a payment exacted by legislative authority. The essential characteristics of a tax are that it is not a voluntary payment or donation, but an enforced contribution, exacted prusuant to legislative authority. The tax is a sum of money demanded by a Government for its support or for specific facilities, a burdensome charge, obligation or demand in consideration of the possession or occurrence of income, goods, sales etc. Fee a charge or payment for services as doctor’s fee, a sum paid or charged for a privilege, such as submission fee, a charge allowed by law for the services of a public officer. “Tax” is a compulsory contribution imposed by sovereign authority and received from the general body of subjects or citizens. Fee is a charge for special services rendered to individual by some Governmental Authority. It is a sort of return or consideration for services rendered and therefore, it is necessary that the levy of fee should, on the face of legislative provision, be correlated with the expenses rendered by the Government in rendering the services. No doubt both tax and fee are compulsory exactions, but the difference between the two lies in the fact that the tax is not correlated to a particular service rendered, but is intended to meet the expenses of the Government and a fee is meant to compensate the Government for expenses incurred in rendering services to the person from whom fee is collected. A tax is for the purpose and goes to the general revenue unlike fee. Fee is a reward or recompense for service while tax is an impost; a tribute imposed on the subjects. It is compulsorily exacted from the citizens for the support of the Government.
(The writer is corporate and banking lawyer in Pakistan)