The Government provides goods and services Benefits based charges are aligned with the benefits

2900 Words Apr 23rd, 2019 12 Pages
The Government provides goods and services Benefits based charges are aligned with the benefits received principle under the equity lens of sound revenue policy which asserts that those who benefit from a public service should bear a prorated share of the cost of the service. There are three types of benefits based charges including user fees, user charges and monopoly. User fees give permission to do something with regulatory function such as a license or permit. These represent fees for permissions to do something or take some action; hunting, own a business, serve alcohol, rive. The fee have a regulator function; the privilege to provide a good or service or to operate something. User charges are prices governments charge for specific …show more content…
It’s important to understand that revenue must cover the total cost and that the benefit of the good must determine how the cost is shared. For example, take education. If the benefit is shared at a 60% public and 40% private split, then the cost share/tax incidence and revenue generation must also be shared at that same split. You will have the private benefit pay via service charges and the public pay via broad based taxes. Because the externality is broad based then broad based tax should pay part, like income or sales, or property. If you paid the full cost then you would subsidize the social benefit, less educated. The cost share should reflect the benefit share and the revenue structure should reflect benefits received. So, we would have service charges for education consisting of tuition and fees. The degree of subsidy is the same as the degree of externality you feel for the good. Since the public benefits greatly from educated people, they too, will fund education through a broad based tax like sales or property.

Benefit of service charges

The Advantages of service charges and fees are that charges reduce wasteful consumption of some public services by heightening users’ awareness of the cost of providing the service. Because service charges are based on the quantity consumed by each user,
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