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Home Public Revenue and Taxation Types of Taxes


Types of Taxes:


There are following types of taxes:


(1) Tax:


Definition and Explanation of Tax:


A tax is a compulsory contribution to the public authority to cover the cost of services rendered by state for the general benefit of its people. In the words of Plehn:


"Taxes are generally compulsory contributions of wealth levied upon persons, natural or corporate to defray the expense incurred in conferring a common benefit upon the residents of the state".


If we analyze this definition, we will come to the following conclusions: First, a tax is a compulsory payment to the public authority. Secondly, a tax is to be paid by a person on whom it is levied whether he derives any benefit from it or not. Thirdly, a person who pays taxes to the state cannot claim that because he pays taxes, therefore, a specific service in return should be provided to him.


For instance, he cannot demand that a constable should be posted at his residence to protect his property at night. The government spends money which it derives from taxes in maintaining law and order in the country and like other individuals he gets benefit from it. There is no direct quid pro quo (direct return) in the case of a tax.


In the words of Thomas:


"A tax is a compulsory contribution made to government under stated conditions and not a return for a specific service rendered".


(2) Fee:


Definition and Explanation of Fee:


A fee is a payment made by the citizens of a country to state for obtaining a definite service in return. Fee. like tax, is not compulsory contribution. It is only paid by those persons who enjoy the special benefit of the services rendered by the state. The amount of the fee is generally less than the cost of rendering the service.


For instance, student's fee is not equal to the cost of service rendered to .him. Some part of the total cost is covered by fees and some by taxes. Plehn has defined fee in the following word:


"A fee may be defined as a compulsory contribution of wealth made by a person, natural or corporate, under the authority of public power to defray a part or all the expenses involved in some action of the government, which while creating a common benefit also confirms a special benefit or one that is arbitrarily so regarded".


(3) Price:


Definition and Explanation of Price:


Price, like fee, is also a payment made by a person for obtaining a definite service in return. The difference between a fee and price is that public purpose is more prominent in fee than it is in price. Price is a voluntary payment with a quid pro quo. When a government runs a business, it receives revenue.


For instance, government sells timber from, its forest, iron, coal, copper salt, etc., from its mines it also charges fare on state buses or from railways. The total revenue which the government receives from such services of business character is called price in Economics.


(4) Special Assessment:


Definition and Explanation of Special Assessment:


Special assessment is a compulsory contribution made by the owner of a property for some benefit conferred to his property by the public authority. In the words of Seligman:


"Special assessment is a compulsory contribution levied in proportion to the special benefits derived to defray the cost of a specific Improvement to property undertaken in the public, interest".


We can say in other words that special assessment is a compulsory payment for improvement.


For instance, a corporation provides water, electricity, drainage, paves streets, lays out parks, etc., etc., in a particular locality of the city. The value of all the property situated in that locality will go up. The corporation has every right to share a part of this unearned increment by taxing the owners of the property who have, benefited from the improvement. This tax which is levied in respect of improvement made to the property by the public authority is called "special assessment". Special assessment is more or less in proportion to the benefits enjoyed by the owners of immovable properties.

Relevant Articles:

Sources of Public Revenue
Types of Taxes
Canons/Principles of Taxation By Adam Smith
Essentials/Features/Characteristics of a Good Tax System
Theories of Taxation
Proportional Versus Progressive Taxation
Taxable Capacity
Impact and Incidence of Taxation
Direct Tax and Indirect Tax
Diffusion Theory of Taxation

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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