Taxation

Question 1

What is taxation/tax?

Answer 1

Tax is a compulsory payment to the government that is used to fund public services. Tax is charged on income or business profits or added to the cost of goods and services.

Question 2

What are types of taxes a business pays?

Answer 2

VAT
Corporation tax
Self assessment tax
Custom duties
Commercia rates
Employers PRSI

Question 3

What is VAT?

Answer 3

VAT is an indirect tax charged on the sale of goods and services. It is a tax on consumer spending the standard rate is 23% in Ireland with lower rates for medicine and food stables are a business can register for VAT and claim refunds on any VAT spent

Question 4

What are some implications of VAT for a business?

Answer 4

Changes to VAT will impact competitiveness of businesses in 2019 the VAT rate for hospitality and tourism increased and this reduced profits and forced business to increase prices to maintain profits

Question 5

What is corporation tax?

Answer 5

Operation tax is an annual tax on a company’s profit. The corporation tax rate in Ireland is currently 12 1/2% one of the lowest worldwide. The tax is calculated based on a company’s net profit.

Question 6

What are the impacts of the rates of corporation tax?

Answer 6

Corporation tax might impact where a business operates in terms of location. Ireland’s low rate traps lots of foreign direct investment as corporation tax reduces the size of the profit made or held by the company after taxes paid for meaning that countries with lower operation tax have more profit meaning business are attracted to these countries

Question 7

What is self assessment tax?

Answer 7

Self assessment tax is when people are self-employed and have to file their own end of your tax returns by completing a form 11 or 12 and submitting it to revenue. The taxes is due before the 31st of October every year and what is owed is based on the tax and income of the previous year.

Question 8

What are implications of self assessment tax on businesses?

Answer 8

As self-employed persons need to organise their own taxes to be paid they need to ensure that they are organised and file their taxes before the 31st of October and that they are accurate. They can do this by hiring someone to do it - if someone does not do this by the time Then they face fines on top of their tax bill and interest charges

Question 9

What are commercial rates?

Answer 9

Commercial rates are charge as business owners pay to local authorities to fund the upkeep of local community for parts parks and roads, et cetera

E.g. the county council

Question 10

What are implications of commercial rates?

Answer 10

Implications are that pain? These rates could go to improve in the infrastructure around a business in increasing footfall and sales a negative is that these rates are paid so that our business can operate in a certain area so it can reduce profit levels

This is money used to improve the area that the business is located in

Question 11

What is custom duties?

Answer 11

Custom duties are taxed on imports. It applies on top of VAT for imported goods outside the training block, e.g. the European Union.

Question 12

What are implications of customer duties?

Answer 12

If a business import stock or all materials from outside the EU, it has to pay additional tax on them e.g. the UK which means that businesses that trade with countries outside of the EU have to pay more tax so reduce their profits as they are spending more money on taxes

Question 13

What is an employersc PRSI?

Answer 13

PRSI is the main source of funding for social welfare, both employer and employee contribute to this

Question 14

What are implications for business of employers PRSI?

Answer 14

Implications are that the cost of employee a worker is higher than the actual wage paid as the employer also has to pay PRI

Question 15

What is the PAYE tax system?

Answer 15

This is pay as you earn. It is a direct tax on income earned from employment a business collects the tax when paying it staff and gives it to the government. It is a progressive tax meaning the more you earn the more tax you pay.

Question 16

What are implications of the PAYE system for businesses?

Answer 16

An employer will need to hire someone or outsource to a payroll administrator to calculate the right amount of tax to be reduced reduced from employees wages to be passed on to revenue

High rate of PAYER a decent for people to do overtime which affects a companies ability to eat sale orders people would be less willing to work overtime as they will have more tax so we’ll get less money

The higher the PAYE in the country, the less disposable income for people so people have less money to spend on goods and services

Question 17

What are revenue commissioners?

Answer 17

It is the government organisation in charge of collecting all taxation on behalf of the state

Question 18

What are some type types of tax forms?

Answer 18

Preliminary end of year statement
Statement of liability
Income tax return

Question 19

What is the preliminary end of year statement?

Answer 19

It is a preliminary calculation to show the employee if they have paid the correct amount of tax and USC employees can see all their tax information online

Question 20

What is statement of liability?

Answer 20

It is an statement that employees will receive once they complete an income tax return. This will then be used to calculate overpaid or underpaid taxes for the employee.

Question 21

What is income tax return?

Answer 21

It is a form that employees need to return to in order to claim additional tax credit declare any additional income order a statement of liability claim refund of overpaid tax or USC

This form can be completed online on the revenue website

Question 22

What is the difference between tax rates tax credits and tax bands?

Answer 22

A tax rate is a percentage charged on a certain tax. It is dependent on the level of taxable income.

Meanwhile tax credits are an entitlement to different allowances depending on each persons personal circumstances which will reduce tax liability calculated upon a persons tax due

Tax bands are a different rate of tax depending on which bracket of earning you fall into

Question 23

What is tax evasion?

Answer 23

Tax evasion is when taxpayers illegally reduced the amount of tax they are due to pay a person might under report earnings or move money offshore to try and avoid paying the proper tax on it

Question 24

What is the tax avoidance?

Answer 24

Avoidance is when taxpayers use a tax system to arrange their affairs so that they end up paying the lowest amount of tax possible it is legal to do this

Question 25

What are the differences between tax evasion and tax avoidance?

Answer 25

Tax avoidance
Is legal
Done before tax liability
Is when taxpayers pay the lowest amount of tax possible?

Tax evasion
Is illegal
Done after tax liability
Penalty imprisonment
People under report earnings or move money offshore

Question 26

What is universal social tax charge Usc?

Answer 26

USC was introduced by the government and the payable tax on gross earnings. It is a progressive tax as the rate of income increases the rate of tax.

Question 27

What is local property tax?

Answer 27

Homeowners need to value their residential properties and then pay a charge on it based on the market value of the property. There are different brands and higher value houses in higher rates.

Question 28

What is VAT?

Answer 28

VAT is an indirect tax charged on the sale of goods and services it is a tax on customer spending it is included in the selling price of goods that customers buy as businesses adds it to the price of good souls then collect the VAT from good sold and give it to revenue. Standard rate is 23% in Ireland and 13.5% for goods and services and tourism and the hospitality sector and there is no VAT on medicine or food samples.

Question 29

What is self-assessment income tax?

Answer 29

It is a tax that means you are responsible for calculating how much tax you owe revenue each year it is the tax you have to pay if you earn your own income e.g. you are a contractor also trader you need to keep proper records of all purchases and sales of goods as well as all amount received and paid out during the year. You do not need to send them to revenue but you do need to keep them in case you are inspected

Question 30

What is capital gains tax CGT?

Answer 30

This is the tax you are charged on the profit you make when you sell an acid that you own it applies to the sale or exchange of assets like land buildings shares and other assets of value would like jewelry or paintings. The rate was 33% in 2020.

Question 31

What is capital acquisitions tax CAT?

Answer 31

Is a tax that applies to gifts and inheritances that you might receive. Up to 3000 per annum is exempt but only if it is a gift. A gift or inheritance from a parent of their child can be up to £320,000 or as gifts or inheritance between brother sisters nieces and nephews can be taxed for up to £32,500.

Taxes normally paid on inheritance on the date that you were entitled to benefit from them and pay on gifts on the date that they are received

Question 32

What is motor tax?

Answer 32

Motor tax is collected by the local council on behalf of the government. Any household that owns a car must pay this tax and display the taxi certificate on the windscreen. There are higher charges based on higher emissions to offset the impact on the environment. E.g. electric cars are charged tax at lower rates.

Question 33

What is deposit interest retention tax DIRT?

Answer 33

This is a tax a person must pay on the interest they own in a deposit of savings account. It is deduced at source by the bank of financial institution and sent to revenue. The rate was 33% in 2020.

Question 34

What is local property tax?

Answer 34

Homeowners need to value their residential property and then pay a charge on it based on the market value of the property. There are different bands and higher value houses incur higher rates

Question 35

What is pay related social insurance PRSI

Answer 35

It is a social insurance that acts like attacked as it is taken from an employees pay as a percentage of gross earnings 4% in 2020. It is used to determine future entitlement for social welfare benefit should you need them. If you’ve paid into the PRS fund, you will be entitled to full social welfare benefits should you become unemployed

Question 36

What are some similarities between household and business taxation?

Answer 36

• Both must complete paperwork or online forms to register with the revenue to pay tax
• Both need to keep all records and paperwork of tax affairs and be ready for inspection or audit
  E.g. they must keep any proof of any taxes paid or allowance is used like a receipt from a GP visit
• Both must correctly calculate and return the right amount of tax. Both faced large penalties and interest on underled income income if they don’t.
• Both should arrange the tax affairs to reduce the total tax they are due to pay legally i.e. tax avoidance

Question 37

What are the differences in business and household taxation?

Answer 37

• businesses can register for VAT and claim refunds on any VAT spent meanwhile households cannot claim back any VAT spent
• Businesses can write off some expenses before paying tax on them e.g. a desk could be cleaned as an expense reducing the companies tax liability. A household has to pay tax and cannot write off anything.
• Businesses act as tax collector for the government and also calculate the correct tax the employees pay and give it to revenues on the employees behalf. Meanwhile, households only worry about their own tax affairs.
• They both pay different types of taxes for example, a business pay commercial rates while a household pay local property tax