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
without getting any direct benefits.
If the element of revenue for general purpose of the
State predominates, the levy becomes a tax.
In regard to tax, there is not and must not always
be, direct correlation between the tax and the
service intended to be rendered.
Tax is compulsory payment.
If tax is imposed on a person he has to pay it.
Otherwise he has to be panelized.
In this case, tax payer does not expect any direct
benefit.
Examples: income tax, gift tax, wealth tax, VAT
etc.
Fee
Fee is the voluntary payment for getting service.
While a fee is for payment of a specific benefit or
privilege although the special to the primary
purpose of regulation in public interest.
In regard to fee, there is and must always be,
correlation between the fee collected and the
service intended to be rendered.
Fee is the voluntary payment.
On the other hand, fee is not paid if the person does
not want to get the service.
Fee payer can get direct benefit for paying fee.
Examples: Stamp fee, driving license fee, Govt.
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:rkarimreja@gmail.com
 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

COMPARISON
Meaning Minimization of tax liability, by
taking such means which do not
violate the tax rules, is Tax
Avoidance.
Concept Taking unfair advantage of the
shortcomings in the tax laws.
Type of means used Use of Justified means
Type of act Legal
Consequences The result of tax avoidance is
postponement of tax.
Reducing tax liability by using illegal ways
is known as Tax Evasion.
Deliberate manipulations in accounts
resulting in fraud.
Use of such means that are forbidden by
law
Criminal
Whereas the consequence of tax evasion, if
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:rkarimreja@gmail.com