3Y: Purpose of Taxation

Question 1

What is Taxation?

Answer 1

Taxation is the process by which the goverment collects money from citizens and business to pay for public services.

Question 2

Who are the ‘Office of the Revenue Commissioners (Revenue)’?

Answer 2

‘Office of the Revenue Commissioners (Revenue)’ is the state body responsible for the assessment and collection of all taxes and duties.

Question 3

What are types of taxation (4)? Name them?

Answer 3

1. Tax on Income
2. Corporation Tax
3. VAT
4. Excise Duty

Question 4

What is Income Tax?

Answer 4

• Tax on the income of employed people which is deducted from their pay,
• collected by the employer through the PAYE system,
• and paid over to revenue.

Question 5

What is Corporation Tax?

Answer 5

Corporation Tax is the tax on business profits that is paid directly to Revenue.

Question 6

What is VAT?

Answer 6

VAT is the tax on goods and services included in the price of most products and services.

It is collected by the supplier and paid over to revenue.

Question 7

What is Excise Duty?

Answer 7

Excise Duty is charged on products like tobacco, alcohol, petrol, diesel, cars & bets.

Question 8

What are the 6 Principles of a Fair Tax System?

Answer 8

1. Equality - amount of tax a person has to pay should be related to their ability to pay.
2. Certainty - amount of tax a person has to pay should be clear and predictable.
3. Economy - cost of collecting should be less than the amount that will be collected.
4. Convenience - should be easy for each person to pay their taxes.
5. Tax should not act as a disincentive - it tax is too high, people may decide not to work. High taxes can lead to shadow economies.
6. Redistribute Income - Collect money from those who earn higher incomes to look after those who need help - unemployment benefit…etc.

Question 9

Why are taxes imposed? (4)

Answer 9

1. Financial
2. Social
3. Legal
4. Ethical

Question 10

Whate are the financial reasons for Taxation? (4)

Answer 10

1. Financing the work of goverment - education, health…etc.
2. Meeting economic objectives - control inflation…etc.
3. Assisting enterprise - goverment grants to entrepreneurs.
4. Servicing the National Debt - interest and repayments on money borrowed,

Question 11

Whate are the social reasons for Taxation? (2)

Answer 11

1. Redistributing wealth and income for the common good.
2. Meeting social objectives - excise duties on tobacco.

Question 12

Whate are the legal reasons for Taxation? (1)

Answer 12

1. Fulfilling a legal requirement - payment of taxes is compulsory under Irish Law.

Question 13

Whate are the ethical reasons for Taxation? (1)

Answer 13

1. Fairness - taxes must be fair and apply to everyone based on their ability to pay.