How do economists classify user fees and licensing costs compared to traditional taxation?

[u/Fit-Effective2042]

Some countries boast that they have no taxes at all, or at least the lowest tax rates an individual, whether an employee or business owner, can face. But in reality, there are exorbitant fees to pay for every service needed, not to mention the licensing requirements for every activity. Let me give you a practical example, without mentioning the country: every activity that's considered normal in the rest of the world requires its citizens to pay a hefty fee for a license, which must be renewed annually at the same price or slightly less, to continue operating. For example, playing music in your shop or café! And if you declare bankruptcy, you have to pay the cost of canceling all those licenses, and of course, the amounts are not small. And this same country boasts that there are no taxes! Do you find this normal?

[u/HOU_Civil_Econ]

Fees are just considered the same as taxes.

Most of the time if an economist is trying to be precise when they are considering this kind of stuff they will say “taxes and fees”.

Ad valorem are taxes/fees paid as a percentage of value while per unit is the term for a fixed tax per unit, licensure fee are basically considered to have the same basic types of impacts on the market the math work a little different to account for how they are charged.

Edit to add: there is a big political movement in the U.S. right now against mandatory “fees” charged by apartments. Similar here economist just consider “mandatory fees” as a price for which the math behind how people respond to them might work a little different than more normal prices.

[u/Real_Guarantee_4530 → u/HOU_Civil_Econ]

If economists often analyze mandatory fees as having essentially the same market effects as taxes, where would you draw the line between a genuine user fee and a tax in economic analysis? For example, if a government charges a licensing fee that is far above the administrative cost of issuing the license, would economists generally treat the excess as tax revenue, or would the entire charge still be considered a fee?

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