What is the difference between a tax and a charge?

[steepholm]

I've often wondered.

President Obama - or at least the US government, and many other governments beside - refuses to pay the London congestion charge because diplomatic vehicles are exempt from local taxes. But is the congestion charge a tax, or a charge?

Does the embassy pay to have its bins emptied? Or for its electricity? Why not for road maintenance and a pleasant city environment, then? Where does a tax end, and a charge for services rendered begin?

Is it to do with who's doing the charging? Does the embassy pay for window-cleaning, or for refuse collection? Some of these things are in private ownership, some in public - and in several cases they've changed between the two over the years. Yet taxes don't suddenly become charges when you privatise the company - do they? And anyway, why should it be okay to take the state (i.e. taxpayers) for a ride, but awful to do the same to a private company (who are in it for profit)?

Maybe it's to do with the type of service provided - e.g. optional versus obligatory? Yet every self-respecting embassy needs roads to roll along, windows to look out of, and lorries to take away their rubbish. Everyone needs to eat, too, but there's never been any suggestion that food should be distributed by the state out of tax revenues.

Or is it to do with choice - i.e. monopolies vs. free markets? There's only one road network, whereas there's sometimes a choice about refuse companies and always about window cleaners. But in the old days, when there was only one refuse collection service (i.e. the local council), there was never a suggestion that embassies shouldn't have to pay their refuse bills - was there?

All this came to a head in the late '80s with the Poll Tax/Community Charge, of course. If it was a charge for services rendered rather than a general tax, why should people who didn't have children, for example, have to pay for schools they didn't use? That wasn't what brought the poll tax down, though, so much as its regressive nature - something it shares with the congestion charge, which takes no account of either wealth or income.

So - well, I'm genuinely confused. Where does tax end, and charge begin? And what are the criteria by which we can distiguish the two?

Comments

[ashkitty.livejournal.com]

Everyone needs to eat, too, but there's never been any suggestion that food should be distributed by the state out of tax revenues.

Well, there is the MP who tried to write off KitKat bars from the vending machine on his expenses....

Though that's not a matter of diplomatic immunity, just wtfery. ;)

[calimac.livejournal.com]

There's another distinction that might be relevant here, one which I brought up in another context recently: that between a revenue tariff and a prohibitive tariff. I may be in error here, but I have the impression that the purpose of the congestion charge is not to raise money to pay for London's streets but to discourage people from driving into central London. The better it works, the less money it raises.

Paying the congestion charge is sort of like getting a parking ticket, but without the stigma of rule-breaking. Diplomats, as I understand it, are immune from parking tickets; this seems like the same or a similar category.

[steepholm.livejournal.com]

I don't entirely buy "prohibitive tariff." It's a nice question whether the high taxes on, say, petrol, alcohol and tobacco are primarily designed to make driving, drinking and smoking prohibitively expensive, thus saving lives and the planet's lungs, or as revenue-raising measures. To be sure, the money isn't all ploughed back into (say) the provision of roads or public ashtrays (though some must go on treating cancer and cirrhosis), but I imagine George Osborne - and Boris in the case of the congestion charge - would be appalled rather than pleased if those sources of income dried up.

The parking ticket analogy is appealing, but rather reminds me of the Not the Nine O'Clock News sketch in which someone is arrested for "urinatng in a public convenience". Driving in central London is currently a practical necessity of running a large embassy out of Belgravia, in a way that parking on double yellows is not. I don't think it's necessary to argue that the congestion charge is a kind of fine, anyway - merely to establish that it's a tax rather than a charge. And I think the trouble there is that, in a society where some things are subsidised, others are disproportionately priced for reasons of social engineering (e.g. health policy), and some people are exempted from paying for reasons of age, health, poverty, disability, etc, that distinction tends to get pretty blurry. "Charge" basically implies a market model including choice and competition, which right-wing ideologues might wish applied but which doesn't in fact for many public services.

[drasecretcampus.livejournal.com]

When rhinos charge, you pay. I don't know what you do when rhino's a tax.

[drasecretcampus.livejournal.com]

The boat tax but the elephants charge?

[calimac.livejournal.com]

True enough that tax proposals are sometimes unclear on whether they're intended to be prohibitive or revenue-based, like tobacco tax proposals that boast both that they'll discourage smoking and that they're raise lots of money for health programs - you can't do both with the same tax with any efficiency - but that doesn't mean prohibitive tariffs don't exist. They do.

Driving in central London is currently a practical necessity of running a large embassy out of Belgravia, in a way that parking on double yellows is not.

So then if embassies are excused from fines for the second, they should certainly be excused payment for the first.

[steepholm.livejournal.com]

So then if embassies are excused from fines for the second, they should certainly be excused payment for the first.

I don't see how this follows. They are expected to pay for many necessary things (e.g. food). How is this different?

[steepholm.livejournal.com]

When a rhino attacks, you still pay.

When a hippo attacks, you run on the banks.

[calimac.livejournal.com]

Because neither is, as is food, a charge for goods or services rendered. Both are, as you excellently put it, pieces of social engineering.

[steepholm.livejournal.com]

True.

I'm still not clear whether we now have a distinction between a tax and a charge - except that if it's a piece of social engineering rather than a charge for services rendered, I guess it's a tax. But not all taxes are like that. Generally, taxation goes into things like running the government, providing armed services, schools, social security benefits, and so on, rather than trying to chivvy us into doing the right thing. We are often invited to see these activities as services that our taxes pay for - in other words to think of tax as a kind of bill that we pay for getting all this stuff, even if the tax isn't hypothecated (i.e. the bill isn't itemized).

This consumer-based way of thinking about tax makes the distinction between tax and charge quite hard to maintain, at least in my head. An alternative would be to think of tax in a more old-fashioned way, as tribute paid to our rulers - but for political reasons I suppose that's never going to be a popular model.

[calimac.livejournal.com]

Generally, taxation goes into things like running the government, providing armed services, schools, social security benefits, and so on, rather than trying to chivvy us into doing the right thing.

Right: that's the distinction I was making between a revenue tariff and a prohibitive tariff. Perhaps that's more useful than a distinction between a tax and a charge.

[steepholm.livejournal.com]

I suspect so.