The Purpose of Taxation Flashcards
What is Tax?
Tax is a compulsory payment to the government charged on income, business profits, or added to the price of goods and services.
Who collects tax in Ireland?
Office of the Revenue Comissioners.
Ouline briefly and explain the four principals of a fair tax system.
- Equality: the amount of tax paid by a person should be linked tp 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.
What are the four reasons to pay tax?
Financial Reasons
Social Reasons
Legal Reasons
Ethical Reasons
Why do we pay tax for financial reasons? Give examples for each.
Financing theWork of the Government-Tax 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. E.g. Excise Duties
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
Why do we pay taxes for social reasons?
Redistributing Wealth and Income: Money from tax can go towards looking after less well off members of society who may need a helping hand. E.g. Jobseeker’s benefit
Meeting Social Objectives: Taxes can be used to discourage people to use certain goods that are bad for them. E.g. Excise Duties on alchohol.
Why do we pay taxes for legal reasons?
Fulfilling a Legal Requirement: The payment of taxes is compulsory under Irish law. Those who don’t pay taxes illegally face penalties and prosecution.
Why do we pay taxes for 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.
