The Purpose Of Taxation Flashcards
Tax
Tax is a compulsory payment to the government charged on income, business profits or added to the price of goods and services.
The Office of the Revenue Commissioners is responsible for collecting Tax in Ireland
A fair tax system should have the following principles
Equality
Certainty
Economy
Convenience
Equality
the amount of tax paid by a person should be linked to their ability to pay
Certainty
the amount of tax paid should be clear and
predictable
Economy
the cost of collecting tax should be less than the amount that will be collected
Convenience
it should be easy for a person to pay their
taxes
The Purpose of Taxation
Taxes are imposed for a variety of reasons which can be classified under the following headings:
- Financial reasons
- Social reasons
- Legal reasons
- Ethical reasons
Financial Reasons
Financing the work of the government
Meeting economic objectives
Assisting enterprise
Paying off the national debt
Financing the work of the government
taxation is used to pay for the services provided by the government to the public e.g education, health
Meeting economic objectives
taxes may be used to control an increase in the price of goods and services
Assisting enterprise
money from taxes is used to encourage enterprise in Ireland e.g grants
Paying off the national debt
taxes are used to pay interest and repayments on money borrowed by the government
Social Reasons
Redistributing wealth and income - taxation goes towards looking after the members of society who may need a helping hand e.g social welfare payments, pension payments
Meeting social objectives - taxes are used to discourage people from engaging in certain behaviour that is bad for their health or the environment e.g excise duties on alcohol
Legal Reasons
Fulfilling a legal requirement - the payment of taxes is compulsory under Irish Law. Those who do not pay taxes face penalties and prosecution.
Ethical Reasons
Fairness - tax must be fair and apply to everyone, depending on their ability to pay. When people evade tax (don’t pay their taxes) it affects the government’s ability to provide essential services to the public.
