Taxation

Question 1

What is Tax?

Answer 1

Tax is a compulsory payment to the government charged on income, business profits or added to the price of goods and services. It is used to fund public services e.g healthcare.

Question 2

Who is in charge of tax collection in Irleland?

Answer 2

The Office of the Revenue Commissioners is responsible for collecting Tax in Ireland

Question 3

What is PAYE and what does it stand for?

Answer 3

PAYE: Pay As You Earn - this is a type of income tax that people pay on their wages. This is deducted at source by the employer and paid to the revenue.

Question 4

What is USC and what does it stand for?

Answer 4

USC: Universal Social Charge - this is a tax charged on income over a certain amount.

Question 5

What is VAT and what does it stand for?

Answer 5

USC: Universal Social Charge - this is a tax charged on income over a certain amount.

Question 6

What is LPT and what does it stand for?

Answer 6

LPT: Local Property Tax - this is a tax paid by owners of residential property

Question 7

What is VRT and what does it stand for?

Answer 7

VRT: Vehicle Registration Tax - this is a tax paid by those who purchase and register a new car

Question 8

What is Motor Tax?

Answer 8

Motor Tax - this is a compulsory tax paid for all owners of a vehicle. This money is used to improve roads.

Question 9

What is DIRT and what does it stand for?

Answer 9

DIRT: Deposit Interest Retention Tax - this is a tax paid on interest earned on savings

Question 10

What is CAT and what does it stand for?

Answer 10

CAT: Capital Acquisition Tax - this is a tax paid on gifts and inheritance (wealth left to another person when you die)

Question 11

What is CGT and what does it stand for?

Answer 11

CGT: Capital Gains Tax - this is a tax paid on the profits made from the sale of assets e.g. property & investments

Question 12

What is Custom Duties?

Answer 12

Customs Duties: a tax paid on goods imported into Ireland from a foreign country.

Question 13

What is Excise Duties?

Answer 13

Excise Duties: a tax paid on certain goods e.g. oil, alcohol, tobacco.

Question 14

What is Stamp Duty?

Answer 14

Stamp Duty: this is a tax paid on written documents e.g.
property

Question 15

What is Direct Tax?

Answer 15

Direct Tax is charged as income is earned. It is deducted at source.
This means that the tax is charged by the person who pays the income not the person who earns the income e.g. PAYE is deducted by the employer and paid to the Revenue.

Question 16

What is Indirect tax?

Answer 16

Indirect Tax is charged as income is spent on goods and services e.g. VAT is included in the price of goods in a shop. These are paid directly to the Revenue by the shopkeeper.

Question 17

Hay is Tax Avoidance?

Answer 17

Tax Avoidance: is when an individual uses the taxation rules to reduce the amount of tax they pay e.g claiming the tax credits they are entitled to. Tax avoidance is a legal practice.

Question 18

What is Tax Credit?

Answer 18

Key Term - Tax Credit: this is an amount by which a person’s annual (yearly) tax bill can be reduced by. The amount depends on the person and their individual circumstances.

Question 19

What is Tax Evasion?

Answer 19

Tax Evasion: is when a person deliberately does not declare some or all of their income in order to avoid paying the correct tax (or any tax at all). It is illegal and you can be sent to prison if you are found to be evading tax.

Question 20

What is a Wage?

Answer 20

A Wage is payment received for work done. It is calculated on the basis of actual work completed based on time or pieces made.

Question 21

What is a Salary

Answer 21

A Salary is a fixed annual payment made to an employee for work.
This is usually paid in 12 monthly installments.

Question 22

What is a Wage Slip?

Answer 22

Wage Slip is a statement from your employer showing your gross pay (before deductions), all deductions made and your net pay (after deductions).

Question 23

What is Gross Pay?

Answer 23

Gross Pay: is the pay before all deductions.

Question 24

What is Net Pay?

Answer 24

Net Pay: is gross pay minus all deductions. It is also called take-home pay.

Question 25

What is a Statutory Deduction?

Answer 25

Statutory Deductions: These are compulsory deductions which every worker is required to pay by law e.g. PAYE, PRSI, USC

Question 26

What is a Non-Statutory Deduction?

Answer 26

Statutory Deductions: These are compulsory deductions which every worker is required to pay by law e.g. PAYE, PRSI, USC

Question 27

What is Disposable Income?

Answer 27

Disposable Income: is the income that remains when all income taxes and compulsory payments have been made.

Question 28

What is Tax Rate?

Answer 28

Tax Rate is the percentage of tax that is levied on a person’s income.
Standard rate is 20% and higher rate is 40%

Question 29

What is a Standard Rate Cut Off Point (SRCOP)?

Answer 29

Standard Rate Cut Off Point (SCOP) is the amount of income that will be taxed at the standard rate of tax (20%). Any amount greater than the cut-off point (€36,800) will be taxed at the higher rate (40%)

Question 30

What is Tax Liability?

Answer 30

Tax Liability: is the amount of income that must be paid over to the Revenue Commission. It is the responsibility of each person to make sure they pay the correct amount of taxation.