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Difference between fees, contributions and taxes

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In this video of accounting I will explain the difference between fees, contributions and taxes. These would be the definitions of the following concepts:

  • what are the fees: they are the "voluntary" payment in exchange for something offered by the public entity. For example, tuition to go to college.
  • what are contributions: they are mandatory payments in exchange for a service. For example, garbage collection.
  • what are taxes: Mandatory payments that do not receive any specific service in return. For example, personal income tax.

These three elements are payments to public entities but as you have seen they are different since the rates Y contributions are paid "voluntarily" or "obligatorily" but receiving something in return and, instead, the taxs are paid "compulsorily" but without receiving anything in return,

You will understand this explanation much better in the video and if you want to check that you have understood it, you can do the printable exercises with their solutions that I have left you on the web.

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