Chapter 9- Taxation

Question 1

What is tax?

Answer 1

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

Question 2

What is the Office of the Revenue Commissioners responsible for?

Answer 2

Collecting tax in Ireland.

Question 3

What do the government use tax for?

Answer 3

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

Question 4

What is PAYE?

Answer 4

Pay As You Earn:

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

Question 5

What is USC?

Answer 5

Universal Social Charge:

Tax charged on income over certain amount.

Question 6

What is VAT?

Answer 6

Value Added Tax:

Tax charged on goods and services, included in price.

Question 7

What is LPT?

Answer 7

Local Property Tax:

Tax paid by owners of residential property.

Question 8

What is VRT?

Answer 8

Vehicle Registration Tax:

Tax paid by those who purchase and register new car.

Question 9

What is Motor Tax?

Answer 9

Compulsory for all vehicle owners, used to improve roads.

Question 10

What is DIRT?

Answer 10

Deposit Interest Retention Tax:

Tax paid on interest earned on savings.

Question 11

What is CAT?

Answer 11

Capital Acquisition Tax:

Tax paid on gifts and inheritance.

Question 12

What is CGT?

Answer 12

Capital Gains Tax:

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

Question 13

What is Customs Duties?

Answer 13

Tax paid on goods imported into Ireland from foreign country.

Question 14

What is Excise Duties?

Answer 14

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

Question 15

What is Stamp Duty?

Answer 15

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

Question 16

What is CT?

Answer 16

Corporation Tax:

Tax paid on the profits of a company/ business.

Question 17

What is a wage?

Answer 17

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

Question 18

What is a salary?

Answer 18

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

Question 19

Time Rate:

Answer 19

Wage calculated based on number of hours worked.

Question 20

Piece Rate:

Answer 20

Wage calculated based on amount of work done.

Question 21

Commission:

Answer 21

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

Question 22

Overtime:

Answer 22

Payment for working more hours than ordinary working week.

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

Question 23

Bonus:

Answer 23

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

Question 24

Gross pay:

Answer 24

Pay before all deductions.

Question 25

Net pay:

Answer 25

Gross pay - deductions, (also called take-home pay).

Question 26

Statutory deductions:

Answer 26

Compulsory deductions every worker is required to pay by law, e.g. PRSI (Pay Related Social Insurance).

Question 27

Non-statutory deductions:

Answer 27

Not compulsory, by choice. E.g. pension, trade union.

Question 28

Disposable income:

Answer 28

Income remaining when all income taxes and compulsory payments have been made.

Question 29

What is a wage slip?

Answer 29

Statement from employer showing gross pay, deductions and net pay.

Question 30

Tax rate:

Answer 30

Percentage of tax levied on person’s income.
Standard= 20%.
Higher= 40%.

Question 31

Tax credit:

Answer 31

The amount by which a person’s annual tax bill may be reduced, e.g. single, widow, married.

Question 32

SRCOP:

Answer 32

Standard Rate Cut Off Point:
Amount of income taxed at standard rate.
Any amount > cut off point (€33,800) taxed at higher rate.

Question 33

Tax liability:

Answer 33

Amount of income that must be paid to Revenue Commission. Responsibility of each person to make sure they pay correct amount of tax.

Question 34

Tax avoidance:

Answer 34

Reducing amount of tax you must pay in a legal way, e.g. claiming tax credits.

Question 35

Tax evasion:

Answer 35

Deliberately not declaring income to the Revenue to avoid paying tax, illegal.
E.g. paid in cash for work.

Question 36

What are the steps of tax calculation?

Answer 36

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).