Which of the following constitute a tax and why?l  Payment for driver’s license?  l  Payment for required (by government) house appraisal?  l  Payment for hotel use of 1% of bill to pay for city projects.  l  Payment for rental car use of 3% of bill to pay for the roads.

Asked Jun 15, 2019

 Which of the following constitute a tax and why?

l  Payment for driver’s license? 


l  Payment for required (by government) house appraisal? 


l  Payment for hotel use of 1% of bill to pay for city projects. 


l  Payment for rental car use of 3% of bill to pay for the roads. 


Expert Answer

Step 1


Tax: It is an amount which is a compulsory contribution to government’s revenue and levied by the government on Income of individuals, profits of business or on the transactions, services and value addition to the cost of goods.


Fee: It is an amount paid by the individuals and corporates to professionals or public bodies in exchange of services.

Step 2

Payment for driver’s license:


It is a fee. It is collected by the government department and used only for providing the services for which it is collected.


Hence, payment for driver’s license is a fee, not a tax.


Payment for required (by government) house appraisal:


It is a fee paid to the governmental department by the buyer. ...

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