Chapter 9- Taxation Flashcards

1
Q

What is tax?

A

Compulsory payment to government. Charged on income, business profits, or added to price of goods and services.

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2
Q

What is the Office of the Revenue Commissioners responsible for?

A

Collecting tax in Ireland.

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3
Q

What do the government use tax for?

A

Fund public services, e.g. schools.
Ensure equal distribution of wealth, e.g. tax charged on income.
Promote/ Discourage activities, e.g. reduce smoking.

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4
Q

What is PAYE?

A

Pay As You Earn:

Income tax paid on wages, deducted at source by employer and paid to the revenue.

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5
Q

What is USC?

A

Universal Social Charge:

Tax charged on income over certain amount.

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6
Q

What is VAT?

A

Value Added Tax:

Tax charged on goods and services, included in price.

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7
Q

What is LPT?

A

Local Property Tax:

Tax paid by owners of residential property.

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8
Q

What is VRT?

A

Vehicle Registration Tax:

Tax paid by those who purchase and register new car.

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9
Q

What is Motor Tax?

A

Compulsory for all vehicle owners, used to improve roads.

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10
Q

What is DIRT?

A

Deposit Interest Retention Tax:

Tax paid on interest earned on savings.

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11
Q

What is CAT?

A

Capital Acquisition Tax:

Tax paid on gifts and inheritance.

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12
Q

What is CGT?

A

Capital Gains Tax:

Tax paid on profits from sales of assets, e.g. property, investments.

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13
Q

What is Customs Duties?

A

Tax paid on goods imported into Ireland from foreign country.

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14
Q

What is Excise Duties?

A

Tax paid on certain goods, e.g. tobacco, alcohol, oil.

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15
Q

What is Stamp Duty?

A

Tax paid on written documents, e.g. transfers and leases of property.

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16
Q

What is CT?

A

Corporation Tax:

Tax paid on the profits of a company/ business.

17
Q

What is a wage?

A

Payment received for work alone. Calculated on basis of work completed based on time or pieces made.

18
Q

What is a salary?

A

Fixed annual payment made to employee. Usually paid in monthly installments.

19
Q

Time Rate:

A

Wage calculated based on number of hours worked.

20
Q

Piece Rate:

A

Wage calculated based on amount of work done.

21
Q

Commission:

A

Payment received based on value of goods sold, motivates employees.

22
Q

Overtime:

A

Payment for working more hours than ordinary working week.

Usually paid at higher rate, e.g. time and a half.

23
Q

Bonus:

A

Extra payment received for reaching target or meeting deadline ahead of schedule.

24
Q

Gross pay:

A

Pay before all deductions.

25
Net pay:
Gross pay - deductions, (also called take-home pay).
26
Statutory deductions:
Compulsory deductions every worker is required to pay by law, e.g. PRSI (Pay Related Social Insurance).
27
Non-statutory deductions:
Not compulsory, by choice. E.g. pension, trade union.
28
Disposable income:
Income remaining when all income taxes and compulsory payments have been made.
29
What is a wage slip?
Statement from employer showing gross pay, deductions and net pay.
30
Tax rate:
Percentage of tax levied on person's income. Standard= 20%. Higher= 40%.
31
Tax credit:
The amount by which a person's annual tax bill may be reduced, e.g. single, widow, married.
32
SRCOP:
Standard Rate Cut Off Point: Amount of income taxed at standard rate. Any amount > cut off point (€33,800) taxed at higher rate.
33
Tax liability:
Amount of income that must be paid to Revenue Commission. Responsibility of each person to make sure they pay correct amount of tax.
34
Tax avoidance:
Reducing amount of tax you must pay in a legal way, e.g. claiming tax credits.
35
Tax evasion:
Deliberately not declaring income to the Revenue to avoid paying tax, illegal. E.g. paid in cash for work.
36
What are the steps of tax calculation?
1- calculate tax (lower and higher rate). 2- deduct tax credit (given in exam). 3- calculate net pay (gross pay, given in exam, minus tax).