For most of us, taxes and duty are the same, since both end up being amounts of money that we have to pay to the Administration, regardless of whether it is Local, Community or State. However, from the fiscal point of view, they are not, since each of them has different characteristics and there are some differences that it is important to know. Continue reading this article, in which we will explain in detail the main difference between tax and duty, so you will know exactly what you are paying in each case.
Difference between tax and duty
The duty is characterized because they are paid in exchange for a service that the administration carries out and that we as citizens receive and use for our benefit, or because we use a public good in a particular way.
Therefore, the duty must be paid directly by all those who use a service. For example, we all have to pay the duty derived from the use of water because it is good that all citizens use. But in the case of the duty that is paid at the time of making an opposition, only those that are presented to the same ones, that is, those who are going to make use of said service in particular.
Taxes, on the other hand, are characterized, mainly because they are paid without receiving any direct compensation in exchange. What generates the obligation to pay the tax is what is called a taxable event, that is, that act or situation that obliges us to pay the tax because it is included in the law. For example, in the case of Personal Income Tax (IRPF), the taxable event is to receive the rent. In the case of the inheritance tax, in the places where it is still valid, the taxable event is to receive an inheritance.
There are different types of taxes and are commonly classified as direct, such as personal income tax, or indirect, such as VAT or the tax levied on tobacco or gasoline.
Once you know the main differences between taxes and duty, you should know that both are taxes, that is, an obligation to pay money established by law, whose amount is intended to support the various public charges.
What is a tax?
Taxes are the most important taxes and also the most usual ones. In fact, they constitute the main source of financing for public administration. Unlike taxes, in the case of taxes, there is no specific consideration for their payment, but rather they are part of the state’s machinery to facilitate a certain welfare state. In addition, through taxes, the administration redistributes the country’s wealth, among other things.
There are different types of taxes and ways to classify them, although the most common is to do it between direct and indirect taxes. The first is applied to a direct and immediate manifestation of economic capacity, such as obtaining a guaranteed income or having an object. On the other hand, the latter refers to an indirect event, such as an act of consumption or the transfer of part of the heritage. Here you can expand information on this and know which is which.
But nothing like some examples to finish clarifying what a tax and the difference between taxes and duty is. In this sense, the IRPF, the VAT or the Wealth Tax are taxed from the fiscal point of view. The first is established according to the income and the third of the inheritance, while the second does not have that progressive character and just taxes the mere act of consuming, although there are different types of VAT depending on the service you hire or the object that buys.
Tax rates and individual taxes types of taxes
In none of the previous examples is a public service taxed, but they are tributes that are merely there for no apparent reason other than making the citizen pay. Another issue is that this payment is necessary to maintain the current system and the welfare state that we enjoy.
What is a Duty?
The duty operates differently from taxes. In this case, it is paid in exchange for a service performed by the public administration or by an act that derives a benefit or special advantage for a specific person. That is, the duties are directly related to a service or activity.
The main difference between duty and taxes is that the former does not have a universal character, as it does with many taxes. In other words, the duty is only paid by the person who uses the service, not all citizens.
In the case of public services, a good example of a duty is the Garbage duty or duty of Urban Waste that serves to cover the collection of garbage by the municipality and is paid by those who have housing. One of the particularities of the duty is that it is linked to a service, and the collection cannot exceed the amount of the service. The translation is that the municipality can not get rich or earn money with the duty. In the previous case, the amount of the duty should be the result of dividing the cost of the service by the number of people or households that will use it.
Another example would be the opposition duty, which is only paid by those who apply for an examination or duty for building permits, which is funded by the municipal authorities to build. In both cases, it would be administrative activities from which a particular or unique benefit affects the people who benefit from the service.
All are tributes
Both taxes and duties are taxes. To these two is added a third type of praise within the tax system that we have already mentioned: individual contributions. In this case, we are talking about taxes through which the taxpayer obtains a benefit or an increase in the value of his assets. An example would be public works or the expansion of public services. Again, with the contribution, some counter benefit is obtained, even though this is not as direct as those related to the duties.
In a way, the unique contributions are similar to the spills that must be paid in a community of neighbors when an improvement is undertaken, only that in this case the community would be the town hall, the autonomous community or the whole country, depending on the case.
As it happened with the duties, it is essential that the contributions do not exceed the total cost of the work or service to which they refer. That is, they can not be used as a means to obtain a benefit from the administration.