Duty vs. Tax

Difference Between Duty and Tax

A government in any country throughout the world has a host of responsibilities towards its people in terms of development of the country and its people. In order to fulfill their commitment, the government requires resources and they emanate from different sources like taxes and duties. Therefore, duty and tax are two significant sources of revenue for the government. Yet tax and duty are involuntary contributions and are considered to be rather a financial encumbrance laid upon the people to provide a means of support towards the operation of the government. The money collected through duties and taxes is utilized by the government for different purposes like expenditures spent on law and order, public works like construction of roads, bridges, schools and hospitals as well as pensions, social benefits and modes of transportation for people along with payment of salaries to government employees and the security of the country on the whole.

The usage of the word, Duty is widely used pertaining to goods, such as customs duty, import duty, excise duty so on and so forth. Duty is a kind of a tax that is tariff on merchandise imported from abroad. It is also charged on goods produced within the country like excise duty. Duty is imposed on goods and not on citizens. One of the most widespread instances of a duty is custom duty which is considered to be an indirect tax levied on goods that are purchased from foreign countries, where the buyer has to pay tax on them on entry into the country. In a similar manner, duty that is charged on goods moving out of the country is known as import duty.

Taxes are levied by the government to execute its obligations towards its people. They are the core of all the revenues generated by the government. Therefore the money collected by the government from the private sector companies comes within the ambit of taxes which also include duties. Taxes are not involuntary meaning that a person is liable to be punished by law if he evades paying of taxes. Taxes are generally of two kinds, such as, direct and indirect taxes like income tax which is deemed to be a direct tax and VAT that is an indirect tax. The main objective of the money collected, irrespective of the nature of taxation is to cater to the four R’s. These four R’s are as follows:

* Revenue – Government generates its income through taxes to spend on roads, bridges, army, schools, hospitals, legal system, salaries, pensions and law and order.

*  Redistribution – This is pertinent to social engineering meaning taking money from rich sections of the population and distributing amongst the weaker sections of society.

*  Re-pricing – This is primarily done to discourage use of certain items like tobacco and alcohol.

* Representation – refers to the accountability of the government towards its citizens.

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