Tax and Price

The revenue of the Govt. through the sale of goods and services produced by the public enterprises is called price. The main points of difference between tax and price are as follows

(i)   Tax is an unearned revenue of the government. But price is an earned income. The government invest money to start public enterprises from which it earns revenue in form of profit. When the government charges a price for the goods and services supplied, profit emerges. Hence it is an earned income.

(ii)   Tax is a compulsory payment, but price is voluntary. If we do not purchase a post card or do not travel by train, then there no need to pay for the post card or the rail journey.

(iii)  There is no direct quid-pro-quo in case of tax. But the person gets direct benefit from goods and services by paying the price to the government.

(iv)  In case of price, the amount paid by individual bears some relationship to the extent of service rendered. Railways rates are related to the distance and electricity rate are related to the unit of consumption. But in case of tax this is not so.