Government Budget Flashcards
What is direct taxation
Direct taxes are taxes on income and wealth
Examples:
USC
PAYE
Corporation tax
What is indirect taxation
Indirect taxes are taxes on goods/services and are paid indirectly to the government by final consumers. Indirect taxes are taxes on spending.
Examples:
VAT
Excise duty
Carbon tax
The principles of taxation
Developed by Adam Smith and outlined in The Wealth of Nations (1776), a tax or tax system should display several key features:
Equity - taxes should be equitable and fair
Economy - taxes should be cheap to collect
Convenience - tax should be collected in a manner that is easy for the taxpayer to pay
Certainty - taxpayers should know their tax liability
VAT
VAT is an indirect tax on goods/services paid by final consumers.
The VAT in the hospitality sector was reduced from 13.5% to 9% to help stimulate tourism.
What is a regressive tax
A regressive tax does not take account of the taxpayers ability to pay. It takes a higher percentage of income of a low-income earner and a lower percentage of a high-income earner.
Excise duty
Excise duties are levied on tobacco, alcohol and fuel
Reasons:
They are unnecessary goods and services
The consumption of all 3 is viewed as harmful
Taxes imposed on them increase prices. As a result, consumption of them is lower
Excise duty is a regressive tax
Lager - 55c, cigarettes, €8.50
The Universal Social Charge
The USC was introduced in 2011
USC rate decreased from 4% to 3%. USC is a disincentive to work as it reduces the take-home pay of workers.
The government make €4bn per annum
What is a progressive tax
A progressive tax is a tax that takes into account the taxpayers ability to pay it. It takes a higher percentage from a high income earner and a lower percentage from a low income earner. Example: VAT, USC
PRSI
Revenue raised from PRSI goes into a social insurance fund. This fund is then used to fund social insurance benefits such as certain social welfare payments. Examples include: illness benefit, state pension or jobseekers benefit.
PAYE
PAYE is a progressive tax as the more a taxpayer earns, the more they pay in PAYE. 20% below €44,000, 40% above €44,000.
Sugar - sweetened drinks tax
Came into effect in 2018. 5-8g per 100ml = 20c extra per L
Over 8g per 100ml = 30c extra per L
LPT
Introduced in 2018 to broaden the tax base, i.e. increase the number of areas on which tax was levied. Replace the fall in revenue that resulted in the property market. 0.18% up to one million. 0.25% on the portion above one million.
Arguments in favour of LPT
More revenue for the government (€500m), doesn’t discourage people from working, potentially equitable.
Arguments against LPT
May not have the means to pay it, stamp duty, financial burden.
Carbon tax
Is a charge applied to carbon emitting fuels such as coal, peat, oil and natural gas. Introduced in 2010.
