Question

Compare the pros and cons of fees versus taxes based on the principle of taxation.

Answer 1

Pros and Cons of Fee

Pros

1. Fee is paid to avail certain service. The person who avail those need to pay certain fee and the person who doesn't avail the service need not to pay the fee.

2. It is easy to calculate and understand.

3. The person who avail the service know about the fee before avail the service.

4.It is hard to deny the fee after avail of the service.

5. Different fee for different services are pre determined.

Cons

1. The person who can not afford the fee failed to get certain service.

2. This does not maximize social welfare.

3. Coming to the coverage part, fee has a limited coverage.

Pros and Cons of Taxes

Pros

1. Tax is paid by the people as a duty towards the society.

2. Tax payment provides essential utilities like engry, water, etc. When the people pay the tax the government revenue increase and spent for social as well economic development.

3. Tax payment also strengthen the social security in a country.

4. It is enforcement by law.

Cons

1. It reduces consumption in an economy as after tax the income decrease.

2. Along with consumption the savings also decres and it affects the investment in the economy.

3. In tax payment there is lack of freedom i.e. a person have to pay the tax in a specific time.

4. Tax may discourage people to work less and it would reduce efficiency in the economy.