JC Business - Purpose of Taxation

Taxation

The process by which the government collects money from citizens + businesses to pay for public services

Who collects the tax in Ireland?

Office of the Revenue Commissioners

Principles of a fair tax system

-Equality
-Certainty
-Economy
-Convenience

Equality

The amount of tax that a person has to pay should be related to their ability to pay

Certainty

The amount of tax a person has to pay should be clear + predictable

Economy

The cost of collecting tax should be less than the amount that will be collected

Convenience

It should be easy for each person to pay their taxes when they fall due

Tax should not act as a disincentive

This means if taxes are too high people may decide that it is not worthwhile working, as the Revenue may take most of their income

Redistribute income

A fair tax system should be used to collect money from those who earn higher incomes in order to look after those in our society who need help (jobseekers benefit)

Purpose of taxation

-Financial
-Social
-Legal
-Ethical

Financial purpose

-Financing government expenditure
-Meeting economic objectives
-Assisting enterprise
-Servicing the national debt

Financial purpose example

-Building schools, hospitals + roads
-Pay wages of teachers, nurses + Gardai

Social purpose

-Money collected from taxes can be redistributed for the social good
-Influencing taxpayers behaviour

Social purpose examples

-Giving money from taxes to the unemployed + disabled
-Heavily taxing items that are harmful to your health such as cigarettes + sugar

Legal purpose

-Legal requirement to pay taxes
-Help fund the law enforcement system

Ethical purpose

-Fairness
-Tax evasion
-Tax avoidance

Fairness

Everyone has to pay tax

Self assesment

-Self employed people pay tax through self assessment
-They calculate how much tax they owe themselves